TMI BlogMinutes of the 42nd Meeting of the GST Council on Oct 5th & 12th, 2020X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 2. Deemed ratification by the GST Council of Notifications, Circulars and Orders issued by the Central Government 3. Decisions of the GST implementation Committee (GIC) for information of the Council 4. Timelines in respect of TRAN- 1/TRAN-2 declarations based on the discussions of 13 th meeting of IT Grievance Redressal Committee held on 01.09.2020 5. Update on Return Enhancement and Advancement Project (REAP) in-principle approval of overall architecture 6. Issues recommended by the Law Committee for the consideration of the GST Council i. Extension of the GSTR-1/3B system of return filing and change in due date for quarterly taxpayers upon introduction of the new GSTR-2B functionality ii. Issues related to Annual Return for Financial Year 2019- 20 iii. Steps taken to improve compliance behavior of taxpayers for making furnishing of GSTR-1 mandatory before furnishing GSTR-3B. iv. Amendment to FORM GSTR-1 and notification 12/2017-Central Tax, dated 28.06.2017 for improving data quality to enhance tax administration v. Agenda Note regarding refund to be disbursed in same PAN and Aadhaar linked bank account on which registration has been obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated to all the States in advance and comments have been received from the following States suggesting the following changes. i. The State of Puducherry suggested that: a. in Para 6.5 of the minutes recorded for the 40 th GST Council meeting in line 4 to replace the presently recorded version (Several rounds of meetings were held amongst which one was held in the presence of Hon ble Union Finance Minister and it was agreed that this issue will be resolved) with the following version Several rounds of meetings were held in this regard. One such meeting was held in the presence of the Hon ble Union Finance Minister and it was agreed that this issue will be resolved . b. in Para 9 of the minutes recorded for the 41 st GST Council meeting, in lines 46 and 47, to replace the presently recorded version (Further he brought up the issue that every State was getting 51% revenue share whereas Puducherry was getting only 26% whereas it was entitled to 51%) with the following version Further he brought up the issue that every State was getting 41% revenue share whereas puducherry was getting only 26% whereas it was entitled to 41% . ii The State of Kerala suggested that: a. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference. Agenda Item 2: Deemed ratification by the GST Council of Notifications, Circulars and Orders issued by the Central Government 8. The Secretary asked Pr. Commissioner, GST Policy Wing. Sh. Yogendra Garg to place the Agenda before the Council, PC, GSTPW introducing the Agenda briefed the Council that the Agenda is regarding deemed ratification of Notifications. Circulars and Orders in relation to decisions already taken by GST Council and if deemed fit may be ratified and approved by the Council. He slated that in the 40 th GST Council meeting held on 12-6-2020, the Council had ratified all the notifications, circulars and orders issued before 10-6-2020. He thereafter made a presentation ( Annexure 5 ) listing out ail the notifications, rate and non-rate of CGST, UTGST, IGST and Compensation Cess Circulars and Removal of Difficulty orders issued since 10-6-2020 till 25-9-2020 under the GST Laws by the Central Government as available on www.cbic.gov.in 9. For Agenda item 2 , the Council ratified the following: i. the notification, circulars and Orders as in Agenda Item and the presentation (attached as Annexure 5 ) made during the Council Meeting which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e process cumbersome. He suggested that instead. GSTN should be authorised and with due approval of the Slates, GSTN should be allowed to share information with CAG. He further stated that CAG was presently asking for information from the NCT of Delhi, so the issue needs to be addressed urgently. 10.2 The Secretary to the GST Council acknowledged that suggestion of the Hon ble Deputy CM of Delhi was good and stated that it should be done the way suggested. He added that in consultation with CAG, they had established certain protocol as to how information from the Central Government will go. Now as per the suggestions given by the Hon ble Member, the same will be incorporated and then in principle approval can be taken with regard to the nature and manner of data sharing, so that whatever is decided for Central Government, the same can be placed before the Council and based on that, data sharing can be done with CAG. He informed the Council that the Deputy CAG had met him some time back and placed similar request that going to all the States separately for data will be cumbersome and hinder proper audit. He emphasised that proper audit was must to ensure timely corrective acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2020. Agenda item 4: Timelines for TRAN-1 and TRAN-2 based on 13 th meeting of ITGRC 12. The Secretary of the Council asked the Convener, Law Committee to brief the Council on the agenda. The Convener, Law Committee explaining the agenda informed that in 13 th ITGRC meeting, it was observed by the ITGRC that Rule 117(1A) of CGST Rules 2017 had been amended vide Notification No. 02/2020-CT dated 01.01.2020 extending the due date for submitting the declaration electronically in Form GST TRAN- 1 upto 31.03.2020, in respect of taxpayers who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom the Council had made a recommendation for such extension. Similarly, due date of filing TRAN-2 had been extended upto 30.04.2020. In view of the spread of pandemic COVID-19, these timelines stood extended to 31.08.2020 vide CBIC Notification No. 35/2020-CT dated 03.04.2020 read with Notification No.55/2020-CT dated 27-06-2020. 12.1 He further informed that the ITGRC in its meeting held on 01.09.2020 had recommended 26 cases (12 cases received from Nodal Officers and 14 eases received on account of Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal implications. 13. For Agenda item 4, the GST Council took note of the above and accorded its approval for 26 cases duly recommended by 1TGRC in its 13 th meeting held on 01-09-2020 for opening up of the portal to file TRAN-1/TRAN-2, if they had faced technical glitch Agenda Item 5: Update on Return Enhancement and Advancement Project (REAP) in-principle approval of overall architecture 14. The PC, GSTPW made a presentation ( Annexure 5 ) and briefed the Council that in the 39 th GST Council meeting held on 14.03.2020, it was decided that instead of an entirely new return system, enhancements were to be carried out in the existing system and achieve the same objective. The Return Enhancement and Advancement Project (REAP)undertaken by the GSTN essentially involved, inter-alia, that the liability got auto-populated from the GSTR- 1, the credit got auto-populated from GSTR-1 of the suppliers and ultimately an auto populated return is generated. 14.1 Briefing the Council PC, GSTPW highlighted that following features had already been enabled under REAP: i Nil filing of GSTR 3B by SMS ii. Nil filing of GSTR-1 by SMS iii. Auto population of liabilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at finally everything will be linked, and taxpayer would get an auto drafted GSTR-3B from the system. The ultimate goal is that everybody needs to declare only their GSTR-1 that is their own invoices and once e-invoice was achieved for everybody, even GSTR-1 will also be automatically prepared and from this GSTR-3B will also be prepared. This would ensure that the compliance cost and burden go down significantly and barring reverse charge supplies arid ITC reversals, practically everything will be done by the system. 14.2 He further highlighted that the only area where work was yet to be done was regarding the earlier approved quarterly return with monthly payments which was proposed to be rolled out as part of the new return system for smaller taxpayers with turnover less than ₹ 5 crores. He informed that such taxpayers arc about 89% in number and contributed only about 13% to the total tax revenue. PC, GSTPW stated that a similar QRMP system with a slightly different approach is now proposed to facilitate these small taxpayers. He highlighted that the major issue was computation of the tax liability every month after taking into account the outward supplies, inward suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2021 for which the option be made available from 01.12.2020. He informed that in order to facilitate these small taxpayers, what is proposed is that they are migrated automatically by default to QRMP Scheme and they can opt out during December 2020-January 2021 till 31 st January 2021 and the same will be publicised. With this, he placed the following proposal for in- principle approval of the Council: i. For month M 1 and M2 of the quarter they will file only one challan PMT-06 for their liability (net of ITC) ii. Option to estimate tax liability or pay 35% of cash paid in last quarter iii. Continuous invoice filing facility (1FF) to be made available in M1 and M2 He stated that once GST Council granted in principle approval to the same, the Law Committee would work out the legal framework. 14.4 The Secretary GST Council reiterated that this was proposed to he brought from 01.01.2021 and that it had two components. One part being Technology which was already being worked out and they were confident that this would be done in time. The other part was legal for which certain changes in the Rules would have to be made which Law Committee will work out, so the taxp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders feedback. 15. For Agenda Item 5 , the Council granted in principle approval to the Quarterly Return and Monthly Payment Scheme (QRMP) to be made available from 01.01.2021 as proposed and directed that the Law Committee should work on the legal framework for the same expeditiously. Agenda Item 6: Issues recommended by the Law Committee for the consideration of the GST Council 16. The Secretary then asked PC, GST Policy Wing Sh. Yogendra Garg to take up this Agenda Item. The PC, GSTPW, initiated the discussions with a presentation ( Annexure-5 ) and briefed the Council that all the proposals in this Agenda were discussed and recommended by Law Committee. 16.1 Taking up the Agenda item 6(i) he stated that in the existing returns system consisting of GSTR 1-2-3. since GSTR 2 and GSTR 3 were kept in abeyance. GSTR-1 and GSTR-3B need to be prescribed time and again. He informed that the existing extensions were valid till 30 September 2020. The GST Council in its 39 th meeting held 14 th March, 2020 had already decided on incremental approach to new return system by enhancing existing return system and that as explained in the previous agenda item, the said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecretary added that in this proposal some analysis had been done and it was discussed in Law Committee and the Council can take a final view on this. He stated that Forrn-9C particularly requires some professional help. It was also necessary because whatever extra credit one had taken, had to be reconciled through 9C. He informed the Council that whatever tax came from 9C mechanism last year, majority of it came from those who having turnover more than ₹ 20 crore. So the proposal was that if turnover for mandatory GSTR 9C could be increased from ₹ 5 crore to ₹ 20 crore it would provide a big relief to the taxpayers and a larger number of taxpayers would not have to worry about filing 9C. Further he stated that through data analytics if supposing they Found large gaps and somebody had taken more credit than due to him and if his turnover was Less than 20 crores, they could always ask for more information. The Secretary opined that this kind of balanced approach will protect the revenue and case the compliance burden. He requested the Council to approve the proposal. 16.4 The Hon ble Member from Kerala stated that when they had increased the limit last time lie h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of tax. 16.6 The Secretary sought the permission of the Hon ble Chairperson to respond to the Hon ble FM of West Bengal stating that they had brought several proposals to achieve that goal of plugging leakages. In a sense that some of the proposal had been brought in this Council Meeting and some had been approved in the last two council meetings. One of the points mentioned by the Hon ble Member about people creating companies, fly by night operators, issuing invoices and disappearing had been restricted through introduction of GST registration through Aadhar authenticatIon. Now it was not that easy that somebody gets some PAN card or sonic documents from somewhere and floats a company, issues invoice and disappears. In order to get a registration, one will have to give Aadhaar and if somebody does not give Aadhaar number then in that particular case his premises has to be physically inspected. He was very glad to state that almost 90 percent of the new registration had been through Aadhaar based mechanism. Further he added that GSTR-2B auto-population and matching had been implemented. He requested the Hon ble FM that instead of taking tune here in the next Council meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to the new system, the medium and small industries also will be able to follow up on the same. 16.9 The Hon ble Deputy CM of Delhi stated that the driving force of this proposal, he presumed was change in the definition of MSME. He further stated that he was of the opinion that the 5 lakh taxpayers falling between aggregate turnover of ₹ 5 crores to ₹ 20 crores were already getting their accounts audited, even IT audit was already being done for them. If they were already getting their audit done, they had to merely file return and subsequently with auto population tool this could be done. Therefore, he opined that there was no need to relax it further as ₹ 5 crore limit was already set, it should be allowed to continue and they should not touch it and for the taxpayers with turnover above ₹ 5 crore, it was not a big deal as they were already getting their accounts audited. 16.10 The Secretary, with the permission of the Hon ble Chairperson, staled that the older limit could be retained and accordingly no change may be done. The PC, GSTPW, added that as part of this agenda (ii), a clarification that annual return being optional for taxpayers with les ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payers were already tiling and more than two third of the paying taxpayers were already following this behaviour, He further stated that for the late fee on delayed furnishing of GSTR-1, currently there is an impression that on GSTR-1 there is no late fee though there is a late fee in law. The same is not being populated in the next month s GSTR-3B and not being thus collected also unlike the late fee for delayed submission of GSTR-3B. The proposal is that from I3 of April 2021, GSTR- 1 late fee also appears in the next GSTR-3B. Another proposal for auto-population along with this is that of interest on the delayed payment of tax. He informed that the Council had already decided that interest will be on net basis. Therefore, it is proposed that from 1 st of April, the late payment interest would also auto populated in GSTR-3B so that it can be collected with tax payment itself. It will also bring in more discipline in GSTR-3B filing. No change in law was required and these all were procedural changes. Further, he informed that since GSTR-3B can contain liability of earlier months also, there will be a facility to modify and add interest. 16.14 Taking up the next Agenda Item 6( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod they had stopped blocking e-way bill. The current rule was that if two consecutive GSTR3Bs were not filed the e-way bill gets blocked. Since, conditional relaxation in filing of GSTR3B was given in lockdown period, blocking of e-way bills had been stopped w.e.f. 25 th March 2020. He informed that there was demand from some of the State Administrations that such suspension of blocking should be made part of the rules. So, it was discussed in the Law Committee and the recommendation was a proviso may be added in Rule 138E that from 20.03.2020 to 15.10.2020 no e-way blocking he carried out and that from 15.10.2020 blocking will be reinitiated for taxpayers having aggregate turnover above ₹ 5 crore. He informed that for taxpayers having aggregate turnover below ₹ 5 crores, we would watch the behaviour and then take an appropriate call. He further stated that like they allowed GSTR-3B and GSTR-1 nil filing through SMS now the composition taxpayers who have no liability in a particular quarter also will be able to do NIL filing through SMS. He further highlighted some technical changes as mentioned in his presentation (Annexure 5) for approval of the Council. 16.17 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add interest if part of the liability being declared in GSTR-3B pertains to earlier tax periods. x. Approved making 6 digit HSN for goods and 6 digit SAC for services mandatory for taxpayers above ₹ 5 Cr. turnover w.e.f 01.04.2021 xi. Approved making 4 digit HSN/SAC compulsory on B2B supplies by taxpayers below ₹ 5 Cr. turnover w.e.f 0 1.04.2021 xii. Amend Rules to empower to notify 8 digit HSN on notified class of supplies by all taxpayers xiii. Approved modification of GSTR- 1 to include Rate in Table 12 to have better sectoral data w.e.f 01.04.2021 xiv. Approved grant of refund only in a PAN Aadhaar linked Bank account of the claimant. xv. Approved Aadhaar revalidation at the time of filing refund application. xvi. Approved waiver of blocking of e-way bill during COVID period from 20.03 .2020 to 14.10.2020 - to be given legal backing through a proviso in CGST Rule 138E xvii. Approved blocking to be reinitiated from 15.10.2020 for taxpayers with turnover ₹ 5 crore, xviii. Approved Nil filing of CMP-08 through SMS from a date to be notified-change in CGST Rule 67 xix. Approved change in Rule 142(1 A) making communication of deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt directed that the representation of HADMA dated 27 th JuIy, 2020 be placed before the GST Council for consideration. 18.3 The JS TRU explained the contentions of HADMA. The representation of HADMA dated 27 th July, 2020 was placed before the GST Council as per the Order dated 11-08-2020 of the Hon ble High Court of Punjab and Haryana. The JS, TRU further explained the details of Press release dated 15-07-2020, WCO reference from Covid- 19 medical supplies and other details to the GST Council. He stated that the Fitment Committee had examined the issue and recommended that Ayurveda / Unani / Siddha (AUS) ingredients-based sanitizers were classified under tariff item 3808 94 00 and attracted 18% GST mid as such there should be no distinction between them and alcohol- based hand sanitizers. 18.4 The Hon ble Ministers from Delhi and Kerala expressed their agreement with the recommendations of the Fitment Committee. The Hon ble Deputy Chief Minister from Gujarat also supported the recommendation. The Hon ble Minister from Tamil Nadu stated that same rate should be there for all types of sanitizers otherwise it might lead to misclassification disputes. The Hon bIe Minister f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to release funds to GSTN within specified time, and had requested for extension of time without interest. 20.2 The Secretary stated that the CBIC had paid its first instalment of ₹ 132.22 Crores towards AUC for FY 2020-21. Submitting the status of pendency of AUC as on 29-09-2020, he specifically pointed out the following; (a) The States of Telangana, Punjab and others who had not paid the AUC for FYs 2018-19 and 2019-20 were requested to pay their dues at the earliest. (b) For FY 2020-21, the first installment for payment of AUC was due on 01-06- 2020 and the second installment for payment of AUC was due on 01-10-2020. Many States and the UTs had not paid the AUC for FY 2020-21. Some of the States had requested for extension of time without interest. Hence, he requested the GST Council to give consent for extension of due date for payment of AUC for FY 2020-21 (both first and second installments) till 31-03-2021 without levying any interest. 21. For Agenda Item 8(i) , the GST Council took note of the above and accorded its approval for extension of the due date For payment of AUC for FY 2020-21 (for both first and second instalments) till 31-03-2021 without lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethodology of getting the work done on T M basis, would be followed For developing above mentioned changes along with other critical changes which had direct impact on revenue. Overall 45 resources (30 in REAP and 15 in LEAP Project) starting from 1 st Oct 2020 till 30 th June 2021 would be utilised for the same over and above the existing resources; and (ii) to extend REAP LEAP Projects with existing resources from 1 st Oct 2020 till 30 th June, 2021. 223 Further, the Secretary apprised the Council that the agenda proposed methodology of getting the work done on T M basis through 45 additional resources for developing the software changes mentioned in para 5 of the Agenda Item 8(ii) from 01- 10-2020 to 30-06-2021 over and above the existing resources. He also sought extension of REAP AND LEAP Projects with existing resources from 01-10-2020 to 30-06-2021. 23. For Agenda Item 8(ii), the GST Council look note of the above and accorded its approval to the proposal contained in Agenda Item 8(ii). Agenda Item 8(iii): Status update on conversion of Goods and Services Tax Network (GSTN) into 100% Government-owned Company 24 The CEO, GSTN stated that the GST Counci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the agenda and requested the concerned States to make early payment of their respective share purchase consideration to non-Government institutions. Agenda Item 9: Extension of levy of GST Compensation Cess beyond transition period. 26. The Secretary requested the Joint Secretary, DoR to present the agenda and initiate the discussion. The JS, DoR began his discussion by quoting Section 8(1) of the GST (Compensation to States) Act 2017 which provided for levy of Compensation Cess on supply of goods and services for the purposes of providing compensation to the States for loss of revenue arising on account of implementation of the Goods and Services Tax for a period of five years or for such period as may be prescribed on the recommendations of the Council. To ensure that the total cess is sufficient to cover the compensation requirement during the entire transition period, the ley of cess would have to be extended beyond initial period of five years. He informed that the Learned Attorney General of India, in his opinion in Note dt 26-08-2020. had recommended that the continued levy and collection of the cess beyond the period of five years could take place only in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India. The GST architecture was working very well and as the economic activity picks up the revenue will become very good. The Hon ble Minister from Odisha supported the proposal. 27. For Agenda Item 9 , the Council took note of the suggestions made by the Hon ble Ministers and approved to extend the levy of Compensation Cess beyond June 2022 till the entire shortfall is covered. The extension has to be reviewed from time to time. Agenda item 9A: GST compensation options - ways of meeting the shortfall as discussed on 5 th October, 2020. 28. The Secretary asked the Joint Secretary, DoR to initiate the discussion on the Agenda item. The Joint Secretary, DoR stated that after the discussion on ways to meet shortfall in cess collection in the 41 st meeting of the GST Council held on 27-08-2020, States were given two options to meet their GST compensation shortfall for current FY from market borrowing. The details of the two options were communicated to States by the Department of Expenditure, Government of India. Thereafter, 21 States opted for Option-1 while Puducherry indicated that it would accept Option-1 if accepted by all States, He further stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferentiation in the shortfall in revenue either on account of implementation of GST or due to Covid-19 or any other reason. He urged that the GST Council must live by the letter, word and spirit of the Constitution. The Hon ble minister further stated that the international rating agencies also consider the debts taken by the States to be the cumulative debt of the country when they downgrade or upgrade a country s economic rating. He further stated that the majority should not be the deciding factor, instead, the principles enshrined in the Constitution, considered decisions and judgment that all members had taken since the inception of the concept of GST to the passing of the GST Act should work. He stated that the Centre should come forward to carry out its bounden Constitutional duty in times of stress by being the agency taking the loan which would be serviced by the extended Cess collections beyond June 2022. instead of just being a guarantor. 28.4 The Hon ble Minister from Rajasthan stated that he agreed with the views of the Hon ble Minister from Chhattisgarh. He stated that during the debate on GST in the Parliament, doubts were expressed regarding availability of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his position had been clarified by the Attorney General and was asserted by the Centre. It was also stated that the balance shortfall would be made good in the subsequent years. He stated that even for the current financial year, partial release of compensation may be done. He also stated that the States had pointed out in the meeting conducted by the Union Finance Secretary, that the assumption of 10% normal growth in Option-1 was a highly unrealistic and unwarranted. Instead, revenue gap of the States must be assessed based on the appropriate proportion of the total anticipated loss this financial year under Option-1. He further stated that in such circumstances, given that there are only limited options his State chooses Option- with a hope that it would be reworked to reflect the highest proportion of the actual loss in revenue. 28.8 The Hon ble Minister from Madhya Pradesh thanked the Chairperson for considering the suggestion of the State about reducing the assumed growth rate from 10% to 7%. He stated that under Option-1, even after the State borrows ₹ 4,500 crore, a further sum or about ₹ 2295 crore would be due. He stated that Madhya Pradesh had also suggest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the Covid-19 challenges and for fulfilling various liabilities and welfare schemes for the people. He further stated that in the two options given by the GST Council, a growth rate of 10%, further revised down to 7%, was assumed. A notional growth rate might not work for all the States and the actual growth rate for each States should be taken, as different States have different growth rates. He stated that apart from Ld. AGl s opinion, the Constitutional obligation and statutory liability is on tile Centre, as the assurance was given by the then Chairman of the GST Council. on record in the minutes of the meeting; that when there was a shortfall and when the cess was not accumulating, the Centre would go for open market borrowing to compensate the States. He further stated that the Centre should go for market borrowing as it was the liability of tite Centrai Government to do it and it was mitch easier for them, and the Centre should not tell the States to borrow. Further the Union Territories of Delhi and Puducherry would face additional complexities also. He further stated that there had been a strong tradition of arriving at consensus in the GST Council meetings under the the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in the same manner in which the word sovereign guarantee is used. He mentioned that the artificial differentiation between Covid-19 and non-Covid-19 situation as delineated in the borrowing options would not be possible as the Covid-19 situation was a reality. 28.13 The Hon ble Minister from West Bengal further stated that history should be looked at, and that it was Shri Arun Jaitley, then Leader of the Opposition who said on 20 th December 2013 that the BJP did not support GST because they did not rust the then Central Government to compensate the States. Further, on 18 th February 2017, the then Secretary of the GST Council was asked why the Act should not clearly say that the Parliament shall compensate in five years, instead of the present reading of the Act. The then Secretary went on record to say that the Centre could raise resources by other means for compensation and this could be recouped by continuation of cess beyond five years. He further mentioned that the Chairperson stated on March 14 th 2020 that it was the solemn commitment to the States and the Centre is duty bound to give compensation to the States. The Hon ble Minister informed that when he was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive years for the payment of compensation to the States. He stated that in his opinion, it was only in the case where all the States together agree for a deferment or extension with regard to payment of compensation to them, could one adopt such a course of action. He stated that he had written to the Chairperson on the subject and wanted to know whether the compensation law would be amended to provide compensation in the revised manner and if so, could this amendment be retrospective starting from April 2020. 28.15 He further stated that the state of economy was not good, and the States fisc was stretched like never before and hence measures need to be taken to settle the past dues of compensations. He stated that this would collectively match with the 25% of the revenue gap for the current year and hence the compensation cess collected should be disbursed without any further delay. He further mentioned that the Council could go ahead with the interim plan of borrowing for requirements up to December 2020 and by that time, the proposals could be fine-tuned. He stated that the Centre was expanding the first part of borrowing in Option- 1 by another about ₹ 13,000 crore wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding the compensation till 2022 and (ii) more packages may he designed by the Centre so that purchasing power may be increased and economic performance may be further strengthened. He thanked the Chairperson for supporting the Slate and hoped that the support would continue in the future also. 28.17 The Hon ble Minister from Kerala stated that a written speech was circulated on 03.10.2020 to all the Members of the Council and it be taken as read. One of the main concerns expressed by the States was that the revenue loss which may occur when the taxing powers of States get subsumed, and when the taxation system changes from origin-based to destination-based. The issue of GST compensation was discussed in the Empowered Committee meetings held on 14 th June and 26 th July 2016. The States had unanimously agreed that the compensation should be paid in full for a period of five years. The Union Finance Minister, who was appreciative of the concerns of the States, assured the Empowered Committee that the Centre is committed to give full compensation for a period of five years. The States were assured of compensation by the Central Government and it was incorporated in the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products to be brought into GST. Further, the long-standing demand of the States to appoint a Vice-Chairperson to the GST Council may be considered and implemented at the earliest. He stated that there were two principles on which the Slate would not compromise -. (1) that full compensation had to be paid as it was a Constitutional right of the States and (2) if a borrowing is required, it could not be part of the normal borrowing of the States or the additional borrowing of the States which was already permitted. Option-2 did not meet these conditions. With the current proposal, these principles were not upheld. He drew attention to the statement made by the Union Finance Minister two days after the last GST Council meeting, wherein she assured that as a commitment of the Centre, full compensation would be paid to the States. 28.19 The Hon ble Minister of Kerala further stated that there were four issues which needed to be discussed. (1) the issue of how much compensation would be paid now and how much to be deferred, (2) the issue of who should be borrowing, the States or Centre or both, (3) what would be the terms and conditions of borrowing, and (4) the issue of repayment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tre, when looked at rationally. 28.20 He stated that with regards to the Ld. AGI s opinion that it cannot be paid from the Consolidated Fund, when undistributed IGST fund was not just parked in the Consolidated Fund but was appropriated into the Consolidated Fund, there could be no argument that the Centre cannot borrow to make good the shortfall in compensation to the States. He stated this view goes against the history of discussions held in the Council. Empowered Committee and the Parliament, yet, a discussion should be held regarding how much the Centre should borrow and how much should the States borrow and arrive at a consensus. He stated that regarding the terms and conditions, since it was already decided that the repayment was to be made from the extended cess collection and the interest also to he paid from the same, the whole 2% additional borrowing could be made unconditional as few States would it very difficult to implement the condition regarding direct benefit transfer in electricity sector. He stated that in case this was not acceptable, a dispute resolution mechanism be made active and the issue may be referred to the same as it would only show the maturity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether this would mean that the remaining part of ₹ 1.35 Iakh crore would be given to the States after 2022. He further stated that assumed growth rate of 7% was calculated based on two year average, instead it would have been better to be based on last year s revenue growth rate which was around 2.8% to 3.0%. 28.23 The Hon ble Minister from Assam stated that the Centre had committed at the time of implementation of GST that the Council would compensate the States for the revenue loss due to the implementation of GST, He stated that as per Section 18 of the Constitution (One Hundred and First Amendment) Act 2016 the shortfall due to implementation of GST was to be compensated, the Centre was helping the States even though the Central Government is also facing several such challenges. He stated that the Central Government was also Facing the Covid-19 crisis as the States did and that the entire vaccination program had been taken over by the Centre which would involve expenditure of huge amount. This is in addition to the handling of the situation at Ladakh. He stated that this was the time to strengthen the hands of the Centre rather than having difference of opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which form part of the divisible pool, the cesses and surcharges in the year 2018-19 was around ₹ 2,65,000 crore which had seen a steep increase in 2019-20 to about ₹ 6 lakh crore which was directly reflected on the divisible pool which otherwise would have been automatically been part of the State revenues. In the year 2018-19 the divisible pool was around ₹ 18 lakh crore whereas in 2019-20 (R.E), the divisible pool was reduced to ₹ 15 lakh crore. This had a direct bearing on the revenues of the States. In 2018-19 ₹ 7.61,000 crore was the share of the States taxes which had come down to ₹ 6,50,000 crore in 2019-20. He stated that the Cesses and Surcharges had become the major portion of total taxation which was reflecting on the divisible pool and on the taxes transferred to the States. 28.26 He stated that in this scenario, where the States had far more direct responsibilities for governance and administration, it was requested that certain decisions may be taken which would have a bearing on the revenues of the States such as (i) the assumed growth rate of 7% may be reviewed further in a scientific manner because there was slowdown in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on cigarettes, bidis and tobacco related products. He stated that the World Health Organization recommends that the total taxation should represent at least 75% of the retail price where as it was only 49.5% for cigarettes. 63.7% for smokeless tobacco and 22% for bidis at present. In the name of common man, bidis are taxed on the lower side, but they should also consider the suffering of poor people because of the impact on the health and subsequent economic costs involved. He stated that cess should be charged on these products as was suggested by scientific data. He stated that according to his calculation an amount of ₹ 49,000-50,000 crore could be raised with minimum increase in the rate of cess so that the burden of loan on the States and the Centre would be reduced. He further stated that around ₹ 1,04.500 crore i.e. 1.16% of the GDP was spent on treatment for ailments of tobacco use in 2011 and it could be further more at present. He stated that the Council need not be subjected to allegations that it was protecting the tobacco industry and all the members of the Council should support this proposal as these products were harmful to the health and were deterio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess regarding the borrowing may be started at least for these States. He Further requested that the States, who had not given an option yet may be given sufficient time to choose but the process should start for others so that the States who had opted for option 1 may start getting the required money by November. He further stated that the Council should deliberate and list out goods which can possibly be subjected to compensation cess. He stated that similar to raising compensation cess on cigarettes and tobacco products as suggested by the Hon ble Member from Goa, there was a need to consider a change of tax structure on Pan Masala also as regularly suggested by the Hon ble Member from Uttar Pradesh. He stated that an Officers Committee may be made to deal with the issues of identifying products which can be subjected to cess and the products on which cess already exists but it can be raised. He stated that the States were already reeling under severe economic pressure and the process for borrowing may be started at the earliest. He further stated that regarding the dispute resolution authority, he was the Chairman of the Empowered Committee amid that the Standing Committee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity assigned to him. He stated that there was a loss of revenue of ₹ 2000 crore in these issues and thus they may be decided at the earliest. He further stated that there was a. significant evasion of tax in these sectors and that in their single initiative they were able to uncover a loss of ₹ 738 crore and recover the same. He stated that these could be good sources of revenue. He stated that before GST, in 2015-16 around ₹ 500 crore tax had been collected in brick kilns and at present, it was reduced to less than ₹ 100 crore and thus a decision should be taken at the earliest. He further stated that the problems in Mentha would also be eliminated if Reverse Charge Mechanism (RCM) in which the buyer who purchases from the farmer at the first instance would pay the tax, was implemented. He stated that the State was already doing better at tax collection, compared to last year s collection, and hoped to continue the performance with the support of the Centre. 29.8 The Secretary stated that the issues of pan masala, brick kilns, mentha oil and casinos were already discussed earlier and if time permitted, a presentation regarding the same could be made, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the compensation of around ₹ 1,60,000 crore was given to the States, despite the collection being around ₹ 96,000 crore in the previous year. She stated that she was aware of the difficult times the Centre and the States were facing and that the actual light against Covid was being undertaken by the States. She stated that since she took charge with due process, she had given time to address all the long pending issues. She thanked all the members of the Council for being positive in solving the three problems. She further stated that she was always willing to hear any views of the members whether it was suggestions or criticism and that she never hurried through when a member wants to put his point of view forward. The Hon ble Chairperson further stated that she was not in favour of any code of conduct for the members as each member was a senior and experienced leader managing their States even during the current challenging times. 29.15 The Secretary, GST Council stated that borrowing program was discussed with the Secretary Department of Expenditure and Secretary, Department of Economic Affairs who were in touch with the banks. He further stated that since Agenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 The Hon ble Minister from Punjab reiterated his remark about whether the law would be amended as he regarded that the options provided were not in accordance with law. He further mentioned that the Article 279A (11) of the constitution provided a dispute resolution mechanism and that it could be activated. Tie further stated that if there was no consensus, a division could be called. The Hon ble Member from Chhattisgarh also supported a division. 29.21 The Hon ble Deputy Chief Minister of Gujarat stated that the matter which was being discussed was of immense importance for the States. He stated that the first priority was how to get the fund at the earliest. He Further mentioned that as the Hon ble Member from Karnataka and the Hon ble Member front Assam discussed that once money was received, there would be spurt in economic activities. It was already stated by the Secretary to the Council, if they get approval, they would start the process of availing loan from tomorrow itself. He further stated that any delay would only hurt the States and not the Centre as the States were facing the shortfall of fund and their schemes were not working and requested all the members to cho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representative Officer from Rajasthan stated the State was in favour of Option-3 where the Centre would borrow and disburse the amount to the States. 29.29 The Hon ble Minister from Kerala stated that he had earlier requested that there should be a compromise and a new formula could be arrived at within the broad contours he suggested earlier. 29.30 The Hon ble Chairperson stated that she heard all the Hon ble members, had been rightly reminded that there should be consensus in decision making. Therefore, upholding the tradition of the Council and going by the suggestion of the Hon ble Member from Bihar she proposed to hold another meeting on 12 th October 2020, She was open to have another round of discussions on 12 th October 2020 and then they would take a call that day. She further reiterated that States were on the forefront of fighting Covid, she had cleared disbursement to the States as soon as resources were available whether it was GST compensation or devolution in terms of Finance Commission s recommendation The meeting on 5 th October 2020 ended with thanks to the Chair. Agenda Item 9A: GST compensation options - ways of meeting the shortfall as discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n period. After the transition period, principal and interest would also be paid from proceeds of the Cess, by extending the Cess beyond the transition period. However, as per discussions, it is now decided that at first stage, cess collected would be used for paying the interest and at the second stage, it will be used for repaying the principal and the remaining part would be used for meeting the remaining arrears of compensation. The Secretary submitted that this was the main item for discussion that had been communicated from the Department of Expenditure and requested the Hon ble Members of the Council to express their views on the Agenda Item. 35. The Hon ble Minister from Madhya Pradesh thanked the Hon ble Finance Minister for announcing the special package. He stated that he was glad that Central Government had positively considered the Option- 1 in respect of compensation cess and also considered the other two suggestions given by Madhya Pradesh State. Now, his State could borrow ₹ 4.542 crores instead of ₹ 4,056 crores under the special Facilitation provisions of Central Government and RBI, which they could use for the development work of the State. He adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , they had to approach through the Home Ministry. Government of India. Unless the Home Ministry concurs and the Finance Ministry gives the nod, it would be difficult for Puducherry to borrow. 35.3 He stated that they were grateful to the Hon ble Chairperson who was hearing the views of the Hon ble Members of the Council and trying to arrive at a solution. He requested that the disputes had to be resolved by give and take, all States had to agree because of present critical financial position in various States. Therefore, he requested the Government of India to borrow and pass it on to States and all problems associated with State borrowing such as State Governments approaching RBI, going to open market, in their case, State going to the Home Ministry, could be resolved. Borrowing by the Government of India would be very easy vis-a-vis State Government doing it because without the permission of the Government of India, the State Governments cannot borrow and therefore he wanted easy route to be followed. He requested the Hon ble Chairperson to consider the third option proposed by the Hon ble Finance Minister of West Bengal i.e. the Govt. of India to borrow and give it to States. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to continue and allowing them all to make an honest and concerted effort to conic to a consensus arid not get into options of division or voting and also thanked her for whatever releases had been done so far. lie quoted para.6.3 of the Minutes of the 10 th meeting of the GST Council held on 18 th February 2017 wherein it is stated that: The Hon ble Minister from Telangana stated that the Compensation Law should provide that if money fell short in the Compensation Fund, it could be raised from other sources. The Secretary stated that Section 8(1,) of the draft Compensation Law provided that cess could be collected for a period of five years or such period as may he prescribed on the recommendation of the Council He stated that this implied that the Central Government could raise resources by other means for compensation and this could then recouped by continuation of cess beyond five years. He stated that the other decisions including the possibility of market borrowing for payment of compensation was part of the Minutes of the Meeting of the Council held on 3 rd and 4 th January 2017) and need not be incorporated in the Law, The Council agreed to this suggestion. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orth his submission that there was a historical context. As was discussed in the 10 th meeting of the GST Council held on 18 th February 2017 wherein the then Secretary of the GST Council in the presence of the then Hon ble Union Finance Minister who was chairing the meeting, very clearly said that ...this implied that the Central Government could raise resources by other means for compensation and this could be then recouped by continuation of cess beyond five years... (as mentioned in para.6.3 of the Minutes of the 10 th meeting of the GST Council). In the same spirit after several years, on 14 th March 2020, the Hon ble Union Finance Minister said the same thing, lt was the solemn commitment to the States that the Centre is duty bound to give compensation to the Stated . So his first point was that, it was the historical commitment that they were talking about and the matter of trust and faith in a federal system. 35. 10 He further stated that the options of borrowing by the States were sent after day- long discussions in the 42 nd meeting of the GST Council held on 05-10-2020. The GST Council Secretariat sent Note regarding GST compensation borrowing option - please ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nite as well as had got the spirit of consensus. With the special assistance that had been announced by the Hon ble Finance Minister, they would be able to keep the expenditure towards infrastructure, committed payments and building something that was necessary for the States. He hoped that all that would help to resolve the problem and by the end of the meeting they would be deciding that matter by consensus and to close that issue once for all. 35.15 The Hon ble Deputy Chief Minister of Bihar stated that the first question which had been raised by some States was whether the GST Council had the jurisdiction to discuss the borrowing issue. He personally felt that they were stakeholders and in a federal structure they could discuss any issue in this GST Council but not necessarily take a decision and go for voting on that particular issue. He recalled that earlier the issue of natural gas was discussed even though as on date GST is not levied on it Similarly the issue of Stamp duty on securities was the second example that was presented to the Council. Third example was regarding CST Act where many States had raised the issue regarding C-Form on petrol and diesel. CST Act is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmit extension or deferment of the period of 5 years for the payment of compensation lo States. By law they had no right to extend it beyond 5 years . Then AGI further stated that where all States come together, agree for a deferment or extension in regard to the payment of compensation to them, that one could adopt such a course of action . Keeping in view the above response from AGI, the Hon ble Finance Minister of Kerala was opposed to both the Options suggested by Department of Expenditure, Ministry of Finance, Government of India. According to him, the Option-1 involved deferment of the compensation and there was no guarantee that it would be paid within 5 years. Therefore, he would say that the Attorney General had suggested that it required a consensus and there was no consensus regarding deferment of compensation cess. The Hon ble Minister also drew attention to the AGI s opinion that It is for the GST Council to decide on any other source from it may lawfully recommend crediting the necessary amounts to the GST compensation cess fund . The amount so borrowed has to come to the Compensation Fund and Compensation has to be paid from it. The Attorney General of India s opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their issue was very simple. give them the compensation as per the law or if a pragmatic change was necessary then get the law amended. The word compensation was defined as difference between the projected revenue and the actual revenue. Thus, compensation could not be arbitrarily split into two parts. There was no basis to apply either 7% growth now or 10%. Compensation shall be paid out of the GST Compensation Fund as mentioned in Section 10 of the GST (Compensation to States) Act 2017. Any amount of compensation that comes from sources other than this Fund was not compensation. Thus, unless the Central Government borrowed and credited it to the GST Compensation Fund, it was not compensation. The Section 7 of the Act requires that compensation shall be paid to the States during the transition period which was 5 years. This was clarified in the opinion of the learned Attorney General of India. They needed to take note that in Option-1, a good part of the cess collected would he used to pay the interest on that borrowing of ₹ 1.10 lakh crore. According to him, there should be some legal backing for that. The Learned Attorney General of India had further pointed out that unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... States had agreed that compensation would be paid in lull, they had agreed that it would be through other means that are provided by the law i.e. by borrowing and they had agreed that there would be more amount available for the loans, they had agreed that the entire things would be paid through this compensation cess so there will be no burden on the States or on the Centre. So, these broad parameters had been agreed upon. 35.24 He stated that it had been very clear that the question of compensation had to be addressed immediately. The question was not only that compensation had to be paid; it had to be paid immediately. Further any improvement in terms of efficiency, in terms of broadening the tax net, in terms of procedure, in terms of ultimately increasing the revenue that could be thought over but at the same time, at present. States were in the dire need of money. So, his only humble suggestion was to allow them to operate Option 1. 35.25 The Hon ble Minister from Karnataka earnestly requested not to stop their right to take loan and put that funds in the development activities or States. As most of the senior Members said there was no question of voting on it and if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the last meeting of the GST Council. Hence, under Option-1, if the amount is revised to ₹ 1.80 lakhs crores, consensus among States would be easy, and requested the Hon ble chairperson to kindly consider the request at the earliest. 35.28 The Hon ble Minister from Jharkhand stated that he was in agreement with what had been stated by the hon ble Members from Chhattisgarh, West Bengal and Punjab. When GST Act was framed, it was an Act of faith for them and they trusted in it. Jharkhand got its 70% indirect tax share subsumed in GST. Today they just had 30% and it was known that Jharkhand was extremely backward and poor State. It is difficult for the State to manage with 30% of the taxes of the erstwhile regime. They depended on GST share and GST compensation which was promised to be paid to them at 14% growth rate. He stated that both Option-1 and Option-2 were not acceptable lo them. They are in favour of Option-3 by which they mean that the Government of India should borrow and give the amount to States. He is in agreement with the views expressed by the Hon ble Member from West Bengal on provision of dispute resolution mechanism under Article 279A. He is in agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was a problem in federal structure then the Central Government should come forward to resolve the problem of the State Governments. He believed that the Central Govt should borrow from RBI because they had window system and whoever borrowed, fiscal deficit would anyway be impacted. An amount of ₹ 7,300 crore was due for Rajasthan till September 2020 as compensation from the Central Government. He supported the suggestion that if there was a dispute, the provisions of dispute resolution mechanism can be activated. He proposed the GoM option to give time of 7 days, GoMs would sit, reach at consensus find would take decision. Whatever decision it would be at least States would feel that they were heard and decision was taken On consensus. He would not go for borrowing as it was the responsibility of the Central Government to pay compensation to States and reminded that the Central Government had guaranteed to pay it which was very much mentioned in the law. 35.31 The Hon ble Minister from Himachal Pradesh said that they had opted for Option-1 and decision on Option-1 should be taken soon. Small States like them were facing lot of problems. He requested that as per their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponsibility of all the Stale Governments along with the Central Government to help the States people and the matter needed a quick resolution. He also suggested that the amount of loan that the States would get should be based on the formula of net GST revenue and not gross GST income. 35.36 The Advisor to Hon ble Lieutenant Governor of Jammu and Kashmir stated that they opted for Option-1 in view of their current financial resources and need of funds for the Govt. of J K. He requested for the Council s consideration that Option-1 might be implemented on priority since J K needed finances urgently. 35.37 The Hon ble Chief Minister of Puducherry, while referring to the package and interest free loans for 50 years for the Slates especially for the North-Eastern States and other States based on the formula for devolution of funds under Central Finance Commission pointed out that Puducherry and Delhi had been deprived of these package and loans as they did not come wider the purview of the Central Finance Commission. He felt that the Central Government could borrow without certain limitation whereas States cannot borrow without the permission of the Centre. He further suggested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and until all States agrees it could not be extended, Secretary clarified that what the Attorney General of India meant was that under the current Act, the compensation entitlement would be only for five years. However, actual levy and collection could go beyond live years if the Council recommended, that would not permit the extension or deferment of the period of five years for the entitlement of compensation to the States. In his opinion, therefore. AG has stated that only if the Council agrees to deferment or extension in regard to the payment of compensation to them (States), one could adopt such course of action. In the month of August 2020, the Attorney General of India has further clarified that extending the levy and collection of the cess beyond five years under Section 8(1) of the Act can be done on the recommendation of the GST Council which would require the decision by three fourths majority of the weighted vote. Since all States were represented in the GST Council, that could only be achieved if the requisite number of States supported such recommendations. That was clarified by the Attorney General of India that all States meant requisite number of States that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that was exactly the reason why the Attorney General said that under Article 293(1) States can borrow. As regards apprehension of Hon ble Minister from Chhattisgarh that Compensation Fund was uncertain in comparison to CGST and SGST, Secretary mentioned that in this meeting itself they had approved Agenda item 9 i.e. the GST Council approved that the levy of the compensation cess shall be extended to meet the entire gap. So, once Compensation Cess got extended, it was not an uncertain revenue and it becomes a certain source of revenue. Therefore, on the strength of that compensation fund, the loan or borrowing could be done under Article 293(1). The Hon ble Minister from Chhattisgarh replied that the amount was uncertain for sure. It the collections of Compensation Cess were lower, amount would be lower, but the percentage of CGST and SGST are fixed. 36.5 The Hon ble Minister from Odisha said that the law was elastic not fixed and GST Act or Compensation Act were by-product of the Constitution. He agreed with the submissions made by the Secretary to the Council that similar to a State budget, compensation was an estimate and estimate had already been made. 36.6 The Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake up for the shortage. She stated that this is as per the existing law and this was clarified by the Attorney General of India. She informed that exercising the powers that were vested in the Council, Members had collectively agreed to extend the collection of cess beyond 5 years in the last meeting held on 05.10.2020. She asked the Secretary to the Council to read out the relevant portion from the opinion given by the Attorney General in this regard. The Secretary to the Council referred to the paragraph 2 of the answer given by the Attorney General of India to question No.(iii) on this issue. 39. The Hon ble Deputy Chief Minister of Gujarat referred to the clarification sought by the Hon ble Finance Minister of Chhattisgarh, and stated that if compensation cess collections increased, then the compensation to States would also decline. He further clarified that if in 2021, the market performs better and sales increases, compensation to States requirement would automatically be lower. Therefore, in his opinion, compensation to States was not fixed and it would decrease with an increase in economic activity. He referred to the Hon ble Finance Minister of Odisha pointing out tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fundamentally denying one another s position. She stated that compensation and compensation in full was payable and there was no question about it. However, it was everybody s knowledge that compensation cess had not been yielding adequately. She requested everyone to look at how various views have been resolved in the past and have trust and confidence. She reminded that this was an extraordinary situation and the Members of the Council, including some who were in the Empowered Committee before the Council was formed, would not have foreseen a pandemic of this nature. Therefore, it was not only a problem for the States but the problem was for all of them. 42. While referring to the discussion as to why the Centre could not borrow, she explained that the Centre s borrowing beyond the calendar actually would adversely impact interest rates in the market and not only impact the Centre s case of borrowing but also of States as well as for the private sector. The impact would not be the same if the States were to borrow. She assured that even if the States borrow, the Government of India would work with the RBI to ensure that the States arc able to raise the amount at equitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat he understood and he was grateful for that. 46.1. The Hon ble Finance Minister of Kerala commented that at the end of the deliberations, two contentious issues are still not clear. One issue was to finalize whether the Central Government would borrow or individual States. The other issue was about the amount to be borrowed. He was totally against deferring part amount and how much to defer was something that was to be stated more significantly. 46.2 The Hon ble Minister of Chhattisgarh thanked the Hon ble Finance Minister of India for the complete openness she exhibited in bringing the facts and discussions in the Council. He congratulated her openness not only to listen and reach a consensus. He understood from the conclusion given by the Hon ble Finance Minister of India that the issue was open under Article 293(1) and 293(2) and that nobody could stop anyone from borrowing. 47. The Hon ble Chairperson responded that she had already explained the constraints for the Central Government borrowing the amount. She stated that there is no dispute but a difference of opinion on the approach. She further stated that while there was no consensus, she would urge all to be fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structured grievance redressal mechanism should be established for the taxpayers under GST to tackle grievances of taxpayers on GST related issues of specific / general nature. The GST Council accordingly approved constitution of Grievance Redressal Committee (GRO) at CBIC Zonal / State level consisting of both Central Tax and State Tax officers, representatives of trade and industry and other GST stakeholders. 52.1 Office Memoranda F.No.820/GRC/GSTC/2019 dt 30.12.2019 and 07.02.2020 were issued by this GST Council Secretariat for constitution of GRC at CBIC Zonal f State level in accordance with CBIC letter F.No.20/10/16/2018-GST(Pt.1) dated 24.12.2019. 52.2 The present position of constitution of GRC on the basis of orders constituting Zonal / Stale level GRV which have been received in the GSTC Secretariat, was submitted to the GST Council. The details of constitution of these GRCs are being uploaded regularly on the GST Council website http://www.gstcouncil.gov.in/grievance-redressal-committecs-central-zonestate-level under sub-menu Public Grievance Redressal Committee (GRC) under menu Help for creating awareness amongst the trade. 52.3 AIl State / UTs / CB C Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period from 01.04.2020 to 30.06.2020, before the GST Council as under: Opening Balance No. of Investigation Reports received from DGAP during the quarter Disposal of Cases (during Quarter) Closing Balance Total Disposal during quarter No. of cases where Profiteering established No. of cases where Profiteering not established No. of cases referred back to DGAP 66 21 21 14 01 06 66 54.1 The NAA reported that due to Corona pandemic outbreak, the orders in cases where in the limitation was expiring between 20.03.2020 and 29.03.2020 might not be passed within a period of 06 months from the date of receipt of the report from the DGAP due to force majeure. Accordingly, the orders were passed in terms of the Notification No.35/2020-Central Tax dated 03.04.2020 issued by the Govt. of India, Ministry of Finance (Department of Revenue), CBIC under Section 168A of the CGST Act, 2017 as amended vide tile Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of IGST has resulted in shortfall of IGST devolved to the States and the compensation amount of ₹ 33,000 crores was released in the earlier meeting. He said that CAG had made a very strong observation on this and it reflected poorly on the GST Council. 56.2 The Hon ble Minister of Assam stated that GST Council was not the right forum to discuss the report of CAG as the CAG report would go to the Parliament and the Public Accounts Committee would discuss it. He advised to restrict the discussions to the report of GoM on IGST settlement. 56.3 The Hon ble Minister from Telangana submitted that he would like to bring up an issue other than the Agenda being discussed. One was the issue of ineligible, reversed and lapsed IGST ETC not being settled to the States on monthly basis. In this regard when the settlement reports pertaining to annual returns filed upto 24-9-2020 were run by the GSTN, it was noticed that an amount of ₹ 1,000 crores was due to State of Telangana which may be settled at the earliest. Secondly, him being a Member of the GoM, the GoM has unanimously agreed to the recommendations made in the report. As per the report, he requested that an amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e GST Council. 56.10 The Hon ble Minister from Chhattisgarh requested the Chairperson to clarify what should be the stand of the Ministers of the Council in the Media and when the Council was not meeting, were they to keep silent. So if a public issue came forwards should they not express themselves in the public. 57.11 The Hon ble Minister of Karnataka stated that more focus was required on the Agenda, and the Hon ble Chairperson should take a call and sought greater clarity on the Compensation issue. 56.12 The Hon ble Chairperson stated with regard to the issue of lGST settlement, she did not want to go back to the problem as to how it happened but she pointed that after she took over as the Chairperson. GST Council in 2019, some of these issues that had been festering the GST Council were (i) lGST issue related to a particular State with regard to fixing year revenue, (ii) the lGST settlement issue concerning all States, and (iii) the Compensation Cess issue that had been credited to CFI and had not been transferred to public account. She stated that all the three issues were settled by following proper process within a period of 12 months. The issue of lGST Settlement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian startups engaged in manufacturing and launch of nano/ micro satellites opted for launch of their satellites by foreign space companies instead of ISRO. Antrix Corporation Ltd. or NSIL, the premier Indian agencies engaged in the activity of launching of satellites. One of the reasons fbi this was the GST applicable on the service of launch of satellite by an Indian Space agency such as Antrix or NSIL to an Indian service recipient. 58.1 According to the provisions of GST law, supply of satellite launch services by Antrix Corporation Ltd. or New Space India Limited (NSIL) to international customers against payment in foreign exchange constituted export of service and was zero-rated. However, supply of satellite launch services by ISRO, Antrix or NSIL to a person located in India was taxable. This position had been clarified vide Circular No.2/1/2017-IGST dated 29.9.2017. 58.2 The Council agreed that the satellite launch services supplied by ISRO, Antrix Corporation Ltd or NSIL may be exempted from GST. 59. For Agenda Item 14(ii) , the GST Council recommended that the satellite launch services supplied by ISRO, Antrix Corporation Ltd or NSIL be exempted from payment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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