TMI BlogMinutes of the 43rd GST Council Meeting held on 28th May, 2021X X X X Extracts X X X X X X X X Extracts X X X X ..... ormance Report of the NAA (National Anti-Profiteering Authority) for the 2 nd quarter (July, 2020 to September,2020), 3 rd quarter (October 2020 to December 2020) and 4 th quarter (January 2021 to March 2021) for the information of the Council. 6. Ad-hoc Exemptions Orders issued under Section 25(2) of Customs Act, 962 to be placed before the GST Council for information. 7. Status of the Group of Ministers (GoM) on lOST Settlement 8. GSTN related issues for the consideration of the GST Council i. Sanction for extension of Project REAP, LEAP and BIFA till 31 st March, 2022 on T M basis with delegation to the Chairman to reduce the Manpower, if required. ii. In principle approval to expand the scope of IRP project for e-invoice registration and IRN issuance on expanding the scope with reduction of the threshold of turnover and providing for multiple IRPs, if needed, iii. Proposal for approval of deputation guidelines and to request the States to provide manpower to GSTN with SGST experience. iv. Intimation- the Status update on transfer of share-holding with the States and conversion of Goods and Services Tax Network (GSTN) into 100% Government owned Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 nd meeting of the GST Council pertaining to 13 th ITGRC 16. Review of revenue position under Goods and Services Tax 17. Issues related to GST Compensation Cess 18. Information Agenda on constitution of two new GoMs. Preliminary discussion 3.1 The Secretary, GST Council at the outset stated that the last 42 nd GST Council meeting was held on 5 th and 12 th October 2020 while welcoming the Members to the 43 rd meeting. The Secretary, GST Council, at the outset placed on record its appreciation for the valuable contribution made by the outgoing Members and welcomed the new Members who attended the GST Council Meeting for the first time. The Secretary placed on record appreciation for the valuable contribution by Dr. Ajay Bhushan Pandey, the outgoing Secretary to the Council. He stated that today s meeting was being held in the backdrop of a second wave of COVID that has engulfed the Country and informed that during the intervening period, the GST Implementation Committee (GIC) and various other Committees have been at work in terms of pursuing the decisions taken by the Council and taking necessary steps to ameliorate the adversities of the pandemic situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the result and the formation of the Government happened after which it had been agreed to meet on 28 th June 2021. 3.6. The Hon ble Chairperson welcomed all the new Members and in particular welcomed the senior most Dr. Amit Mitra who continues in the Council. She mentioned that the agenda has been sent in parts over the last ten days. The Officials have met and discussed some of the issues in great detail. She thanked Revenue Secretary for reviving the earlier practice of the Secretary meeting with the Officials of the States on the eve of the GST Council meeting which was helpful and hoped to learn from the exchange with the Officers. She wished that the Council s discussion as always would be very productive/ constructive in the spirit of cooperative federalism and hoped to address all issues which concern the Indian economy particularly now that there was a second wave and post which a lot of decisions pertaining to revival of the economy will have to be taken collectively. The Hon ble Chairperson asked the Revenue Secretary and Secretary of the Council to start the meeting. Agenda Item 1: Confirmation of the Minutes of GST Council Meeting 4.1 The Secretary, GST C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of the Notifications, Circulars and Orders issued from 30 th September, 2020 to 18 th May, 2021, as detailed in the agenda note. The Notifications and Orders issued by the States which are parimateria with above notifications, Circulars and Orders were also deemed to have been ratified. Agenda Item 3: Decisions of the GST Implementation Committee (GIC) for information of the GST Council 7.1. The Commissioner, GST PW, CBIC informed that the GST Implementation Committee (GIC) took certain decisions between 14-09-2020 and 01-05-2021. Due to the urgency involved and due to prevailing Covid-19 situations, while some decisions were taken through web meeting of GIC, other decisions were taken after obtaining approval by circulation amongst the GIC Members. The details of the decisions taken are available in the detailed Agenda Notes (Vol-1, page 96-146). Thereafter, he made a presentation (attached as Annexure-Ill) on the decisions taken by GIC. The decisions taken were submitted to the Council for information. 7.2. The Hon ble Minister from Punjab suggested that rather than for information, these decisions should come for ratification or approval of the Council. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame and it was for that reason that these decisions have chosen to be put to the Council as matters of information. Besides, these decisions are not being taken unilaterally either by the Centre or the States but together by the Centre and the States when they sit together in a sub - committee of Officers, which has been explained earlier. 7.6. The Hon ble Chairperson directed that the issue may be referred to the Law Committee to report on what the Law Committee feels whether any rules have been violated in bringing in GIC decisions to the Council for information. On the basis of the report of the Law Committee, she suggested that discussion may be held in the next meeting of the Council. 7.7. The Hon ble Member from Chhattisgarh stated that he believes that an executive body cannot supersede the elected body. He further stated that there are number of precedents where post-facto approvals are taken. If an executive body has taken an action or taken step at any point in time, the approval was always sought. 7.8. The Hon ble Member from West Bengal stated that the GIC consists of 4 States only. All states are not represented in GIC. Any major decision in GIC cannot take de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report of creation of GRC Zone-wise (CBIC) and States/UTs as 15.05.2021 8.1 The Secretary presented the agenda for information of the Council. During the 38 th GST Council meeting held 18.12.2019, constitution of Grievance Redressal Committee at Zonal/State level Consisting of both Central tax and State tax officers, representation of trade and Industry and other GST stake holders for establishing a mechanism to tackle grievances of tax payers was approved. In view of the above decision, an order regarding constitution of Grievance Redressal Committee was issued by the CBIC vide F. No. 20/10/16/2018-GST (Pt. 1) dated 24.12.2019 and the matter was followed up by the GSTC secretariat. 8.2. As reported in the Agenda GRCs have been constituted in all except the State/Centre level Zones of Gujarat (Ahmedabad) and Haryana (Panchkula). 8.3 The Hon ble Member from Haryana informed the Council that needful has been done in this regard and that the relevant order shall be provided to the GST Council Secretariat. 8.4 The Hon ble Member from Gujarat also stated that the needful has been done in this regard and that the relevant order of the Constitution of the GRC will be sent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for setting up a Cyber Lab at CAPT Bhopal from the United States of America AEO No. 03 of 2021 15 th April 2021 Request from Shri RajdipsinhRathodfor seeking exemption from payment of import duty for import of lifesaving drug Zolgensma, for gene replacement therapy, for personal use. AEO No. 04 of 2021 3 rd May 2021 Seeks to exempt IGST on imports of specified COVID-19 relief material donated from abroad, up to 30th June, 2021. JS,TRU CBIC 10.2 Ad hoc exemption Order No.4/2021-Customs dated 3.5.2021 : Certain COVID related goods such as Remdesivir injection and its API, specified diagnostic markers, medical oxygen, oxygen concentrators and other oxygen storage and transportation equipment, and COVID-19 vaccines had already been exempted from BCD and/or Health cess for limited period, vide Custom notification No. 27/2021-customs dated 20.04.2021, as amended an No. 28/2021 Customs dated 24.04.2021. In view of the prevailing situation, Ad hoc exemption Order No. 4/2021-Custom dated 3.5.2021 has been issued granting exemption from IGST on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manpower, if required. ii. In principle approval to expand the scope of IRP project for e-invoice registration and IRN issuance on expanding the scope with reduction of the threshold of turnover and providing for multiple IRPs, if needed, iii. To place before the GST Council, deputation guidelines approved by Hon ble Finance Minister and to request to States to provide manpower to GSTN with SGST experiences, iv. Intimation - the Status update on transfer of share-holding with the States and conversion of Goods and Services Tax Network (GSTN) into 100% Government owned Company. v. Status of Payment by the States and Waiver of interest on delayed receipt of Advance User Charges (AUC) from a few states and CBIC. 12.2 The Secretary requested the states to provide manpower to GSTN emphasizing that states should provide manpower to GSTN which shall be a good learning experiencing for states and shall help improve the functioning of GSTN. 12.3 The Secretary stated that unless there was any intervention by the Members on the item numbe₹ 8 (i), (iii), (iv) and (v) which are routine items, a presentation on (ii) can be given. Hon ble member from West Bengal stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th May 2021. He thereafter asked the Commissioner, GST Policy Wing (Commissioner, GST PW), CBIC to give a brief overview of the deliberations in the Officers Meeting regarding the recommendations made by the Law Committee on the subject. Agenda Item No.9A(i) - Rationalization of Late Fee: 13.2. Initiating the discussion, the Commissioner, GST PW made a detailed presentation (attached as Annexure-III ). He stated that the first Agenda Item 9A(i) was regarding rationalization of late fee imposed under Section 47 of the CGST Act. As per Section 47 of CGST Act read with relevant notifications, the late fee imposed is ₹ 20 per day for filing GSTR-3B, GSTR-1 and GSTR-4, subject to a maximum of ₹ 10,000 per return. A number of representations have been received from various trade bodies and associations from all over the country highlighting the problem being faced by small taxpayers, having nil or very small tax liability, who are required to pay a high amount of late fee in a number of cases (even higher than their tax liability), due to the higher amount of capping of the late fee. An analysis of late fee collected from taxpayers, with respect to their turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld on 27 th May 2021 and there was an agreement in the meeting on this proposal. 13.7. The Hon ble Member from Bihar requested that late fee for delayed furnishing of GSTR-7 be reduced to ₹ 20/- per day, with a capping of ₹ 500/- per return. Agenda Item No. 9A(ii) - Simplification of Annual Return for Financial Year 2020-21 and related exemptions: 13.8. The next Agenda Item 9A(ii) was regarding Annual Return for Financial Year 2020- 21. The Commissioner, GST PW informed that the Annual returns FORM GSTR-9 9C were simplified for the Financial Yea₹ 2017-18, 2018-19 and 2019-20 by making few entries optional. Based on the recommendations of the Council, the filing of annual return in FORM GSTR-9/9A was made optional for taxpayers having aggregate annual turnover less than ₹ 2 Crore for the Financial Year 2017-18, 2018-19 and 2019-20, and the threshold of aggregate annual turnover for filing of reconciliation statement in FORM GSTR-9C for the Financial Year 2018-19 and 2019-20 was increased from ₹ 2 Crore to ₹ 5 Crore by amending Rule 80. The Commissioner, GST PW also informed that vide Section 110 of the Finance Act, 2021, sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion statement in FORM GSTR-9C for FY 2020-21 to be kept as ₹ 5 Crore. 13.9 The Commissioner, GST PW stated that this issue was discussed in detail in the Officers Meeting held on 27 th May 2021 and there was an agreement on this proposal. 13.10. Hon ble Minister from Haryana stated that reconciliation return duly certified by CA should be insisted from taxpayers having aggregate turnover above ₹ 50 crore. To this, the Commissioner, GST PW submitted that there are ample powers in the Act for the Commissioner to get the accounts of a taxpayer audited by a Chartered Accountant under section 66 of the CGST Act. The Hon ble Minister stated that section 66 of CGST Act 2017 was for special audit and was applicable only if there are valuation and ITC related issues. The Commissioner, GST PW stated that the suggestion of Hon ble Minister of Haryana would be examined separately. Agenda Item No. 9A(iii) - Proposal of Amendments in the Return related provisions of the CGST Act, 2017: 13.11. The next Agenda Item 9A(iii) was regarding proposal of amendments in the return related provisions of the CGST Act, 2017. The Commissioner, GST PW stated that the original desi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.13 The Secretary stated that as private sector taxpayers (with aggregate annual turnover above ₹ 50 cr as on date) are required to generate e-invoices, it may not be proper to exempt the Government departments from requirement of issuance of e-invoice. The Hon ble Minister from West Bengal justified it by saying that Government is a service entity and should not be equated on par with business entities. The Hon ble Chairperson said that Government should comply first, before insisting on small taxpayers to comply. The Hon ble Minister from West Bengal stated that Government is not a profit making entity and therefore, one could justify such exemption from e-invoice for the Government departments. Agenda Item 9B - Other issues pertaining to GST laws and procedures for consideration of the GST Council 13.14. The Secretary asked the Commissioner, GST PW to place the agenda before the Council. The Commissioner, GST PW stated that these agendas were also discussed in detail in the Officers Meeting held on 27 th May 2021. Agenda 9B(i) -Late fee Amnesty Scheme: 13.15 The first Agenda Item 9B(i) was regarding conditional reduction in late fee for delayed filin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Finance Act 2021, may be notified at the earliest (on 01.06.2021) by the Centre. Commissioner GST PW informed that there was an agreement on this proposal in Officer s meeting held on 27 th May 2021. 13.18. Further, he submitted that the Council may like to decide a date, by which time the corresponding amendments in SGST Acts, relating to the amendments done through the Finance Act, 2021, may be carried out by all the States. During the discussion, the Hon ble Members from Tamil Nadu, Haryana, Assam, Karnataka, Maharashtra and Meghalaya expressed various dates. The Secretary stated that by the first week of October 2021, all State Assemblies may have had at least one session. Accordingly, the Hon ble Chairperson proposed that 1 st October 2021 may be decided as the date by which time the corresponding amendments in SGST Acts, relating to various amendments done through the Finance Act, 2021, may be carried out by all the States. Agenda 9B(iii) -Proposal for converting Quarterly return and Monthly payment (QRMP) Scheme to Quarterly return and Quarterly payment (QRQP) Scheme: 13.19 The next Agenda Item 9B(iii) was regarding proposal for converting quarterly retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble Member from West Bengal stated that they are in agreement with the said proposal and that they would recommend QRQP scheme, as it will benefit small taxpayers. Hon ble Member from Delhi stated that it was too early to review QRMP scheme, as this scheme has worked for only three months. The data provided at present was not sufficient to draw any meaningful conclusions and it would be better to allow QRMP scheme to settle before any change was made to the same. He mentioned that in Delhi, the monthly revenue from QRMP taxpayers was 10%, as against 4% for All India. He also added that it would be difficult to return to monthly tax payment, once it was shifted to quarterly payment. The Hon ble Member from Kerala stated that small traders contribute 20% of revenue in their state and therefore, and hence they would like to Continue QRMP scheme. The Hon ble Member from Maharashtra stated that he agrees in-principle that there was a need for easing t compliances for smaller taxpayers, however, the details of such scheme need to be work out by the officers. The Hon ble Member from Himachal Pradesh stated that in Himachal Pradesh revenue from small taxpayers was 15% and that suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief measures already provided under GST to taxpayers through various notifications issued on 01.05.2021 and need for further COVID related relief measures, if any, relating to statutory and regulatory compliances in GST, including extension of due dates. Suggestions! requests received from various stakeholders, including through Hon ble High Court of Delhi, were also deliberated. After detailed discussions and deliberation, the following additional COVID related relief measures were suggested by Officers in the meeting and are placed before the Council for approval: A. For Normal Taxpayers. a) For registered persons having aggregate turnover above ₹ 5 Crore: Similar relaxation, as provided for March and April, 2021, may be provided for May 2021 also: (i) interest @ 9% for first 15 days after the due date of filing return in FORM GSTR-3B for May, 2021 (ii) Waiver of late fee for delay in furnishing FORM GSTR-3B for May, 2021 for 15 days from the due date. b) For registered persons having aggregate turnover upto ₹ 5 Crore (i) For May, 2021, the following relaxations, as provided earlier for March and April 2021, may be provided: For May, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2013 from 27 th April, 2021 to 31 st August, 2021. D. Relaxations under section 168A of the CGST Act: a) Any time limit for completion or compliance of any action, by any authority or by any person, under the GST Act, which falls during the period from 15th April, 2021 to 29th June, 2021 (with suitable exemptions as in the notification) extended upto 30 th June 2021, as far as the same is not covered by order of Hon ble Supreme Court dated 27.04.2021, which has extended timelines till further order, for appeals and quasi-judicial proceedings. b) Deemed registration: Due to difficulties faced by officers to conduct physical verifications during second wave of COVID, the time limit for various compliances for grant of registration under rule 9 of the CGST Rules, 2017, which falls during the period from the 1 st May, 2021 to 30 th June, 2021, be extended to 15 th July, 2021. c) Refund orders: Officers to be allowed time for issuance of the refund orders upto fifteen days after the receipt of reply to the notice from the registered person or 30 th June, 2021, whichever is later. The same were presented to the Council by the Commissioner, GST PW, CBIC and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii). Final draft to be finalised in consultation with Union Ministry of Law and Justice. Corresponding amendments would also be required in respective SGST Acts. (iv) Exempt Government Departments and local bodies from the requirement to issue e-invoice: Government Departments and local authorities may be exempted from the requirement of issuance of e-invoice. 13.25. On the other issues pertaining to GST laws and procedures submitted for Consideration of the council , the recommended as below: (i) Amnesty Scheme to provide relief to taxpayers regarding late fee for pending return. To provide relief to the taxpayers, late fee for non- furnishing FORM GSTR-3B for the tax periods from July, 2017 to April, 2021 may be reduced / waived as under: a) late fee capped to a maximum of ₹ 500/- (₹ 250/- each for CGST SGST) per return for taxpayers, who did not have any tax liability for the said tax periods; b) late fee capped to a maximum of ₹ 1000/- (₹ 500/- each for CGST SGST) per return for other taxpayers; The reduced rate of late fee would be conditional and would apply if GSTR-3B returns for these tax periods are furnished between 01.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficantly. 14.3 The Hon ble Member from Goa supported the proposal of Sikkim and referred to Article 279A (4)(f) introduced vide 101 st Constitutional Amendment Act. He further stated that state of Kerala had imposed a cess of 1% for two years during Kerala floods to raise the funds for rehabilitation work. He said that small states like Goa do not have many resources to raise funds and are dependent on tourism which has taken a hit during pandemic. He stated that irrespective of the size of the State, they should be allowed to charge the cess in situations like the one prevailing. He suggested that for two to three years, the states should be allowed to charge 1% cess on certain goods, which would help meet requirements of States to handle the expenditure related to vaccination as well. 14.4 The Hon ble Member from Arunachal Pradesh also supported the Covid Cess and stated that like Sikkim and Goa, they are also fighting Covid and have limited resources as tourism has stopped due to lockdown. To be able to counter the impending third wave of Covid, the state should be allowed to generate revenue through imposition of cess. 14.5 The Hon ble Member from Kerala supported the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that initially, if an oxygen concentrator was commercially imported or procured from domestic sources, there would be 12% GST, whereas if the same was brought as personal imports or sent as a gift from abroad, it would have attract 28% IGST. This was changed to apply GST at uniform rate of 12%, irrespective of whether it was purchased within the country, from abroad or sent as a gift. The High Court has changed it so as to subject the oxygen concentrator coming as gift to an individual from a relative abroad to 0% GST, while when an individual purchases the same from abroad, it now attracts 28% IGST. Commercial imports and domestic supplies of Oxygen concentrators remain at 12% GST slab. The Fitment committee has suggested that the rate be made uniform at 5% for all cases, whether it was purchased inside the country, from abroad, or sent as a gift from outside the country. Further, he stated that an order has also come from the High Court on the Black Fungus drug. As regards, medicine, it was mentioned that Fitment committee discussed the issue in detail. Fitment was of the view that while there was a need for subjecting medicine to concessional rate of 5% (where GST on COVI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time being. He proposed an alternate suggestion to zero rating, if the Council felt that it was unable to adopt zero rating. 15.6 The Hon ble Member from Punjab referred to the concessions given by way of exemptions, some of which are terminating on 30 th June, some on 31 st July and some on 31 st August. He said that he failed to understand the rationale for the different dates given to such exemptions as well as the relatively short period of time given for such exemptions. He suggested that such concessions could be uniformly extended till the 31 st March, 2022. He stated that the Fitment Committee has been very conservative, and referred to the recommendation of the committee on Remdesivir, which the committee has stated had been removed from the WHO recommended list and thus been denied benefits. Hon ble Member was of the opinion that the Council could exempt every drug for COVID treatment, based on the recommendation of the Union Ministry of Health. He stated that the COVID vaccine has not been exempted from tax, as the Fitment committee argued that the tax burden was borne by the Government. This was only partially true, but a lot of private hospital and corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligious significance of the spot as well. It also has value as a tourism destination. 15.9 The Hon ble Member from Meghalaya stated that there needs to be a balance between reducing GST on devices and preserving revenues. He further stated that there was huge reduction in items mentioned in list in para 3.7A which include medical grade oxygen and Oxygen concentrators, devices which are being utilized the most. He stated that a balance has been struck. He mentioned that the rates on testing kits had been reduced, which was a welcome move. He stated that if the rate on hand sanitizers was reduced, there would be demands for reduction in the tax rates of other related goods such as soaps, which can lead to a chain reaction of demands. He stated that exemption of products may only lead to an increase in the price of product, and it would also further burden the central resources, which are very precious at this time. He suggested that a balanced approach must be followed, and there was a need to be practical. 15.10 The Hon ble Member from Kerala supported the idea of zero rating. He further stated that this was an extraordinary situation, and that a separate model needs to be ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 17(2) of the CGST Act states Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as was attributable to the said taxable supplies including zero-rated supplies. He stated that the CGST Act, and in its wisdom, the Parliament visualized a situation where zero rated supply would be there, and that there was provision in the GST act, very clearly for zero rated taxed. He referred to Chapter Xl, Refunds, Section 54(3), which stipulates that Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilized input tax credit at the end of any tax period: Provided that no refund of unutilised input tax credit shall be allowed in cases other than- (i) zero rated supplies made without payment of tax . There was clear provision of zero rated tax, and that the procedure was clearly delineated in the Act, and as the Parliament envisaged a situation for zero rated tax, this w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Fitment committee. He reiterated the request made by Madhya Pradesh to reduce the GST on biodegradable carry bags to be reduced from current 18% in order to increase use, which would provide a boost to the Swachh Bharat mission and reduce environmental damage. 15.16 The Hon ble Member from Assam requested that the GST concession period be extended by a month due to the late COVID second wave in the North Eastern states. She further stated that to curb this situation, an extension period of at least one month was needed. She further requested for a reduction in the rate of GST on hand sanitizer, which would also send a positive message to the people, and encourage hand sanitizer use. 15.17 The Hon ble Member from Goa appreciated the work done by the Fitment committee. He stated that going for zero rating may be fallacious as it would require a change in the law and would not be possible immediately, and that something immediate was needed. He stated that rate of tax on items such as Oxygen concentrators have been slashed from 77% to 12%. He stated that similarly tax on other items has been reduced as well. Every State needs revenue, and was starved for funds. He said that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State Governments have not needed to incur any expenses. It was separate issue that if a State attempts to purchase vaccines by private tender, the States would have to pay for that. But so far, cost of vaccine received by crores of citizens has been borne by the Union Government. He stated that in Gujarat as well, vaccination has been done by using the vaccines provided by the Central Government. In these cases, the tax does not need to be paid by citizens or the State governments, so this was one issue. On the other hand, if the State government purchases vaccines by floating a tender using their own funds, the Council should consider reducing the rate of GST in that case, to 1% or 0.5% or some other rate. He stated that the way crores of people have received treatment for Corona, with most patients receiving treatment free of cost, in government hospitals, and the State Governments have borne this cost. He suggested that the expenses for injections being used, such as Remdesivir or Amphotericin or medical oxygen, borne by the State governments was a major expense. He gave the example of how Gujarat needed 1100-1200 metric ton oxygen during the peak of the pandemic. Even now 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be automatically converted to 5% slab. Essential equipment which are needed for COVID or for creating facilities related to COVID should have a slab below 5%, similar to suggestions made by other Members. 15.24 The Hon ble Member from Manipur stated that most States, particularly small States face the need to have money, at the same the time, he said that the materials needed to fight COVID 19 must be available at cheap rates, for the common people as well as the State Governments. He welcomed the proposed reductions and stated that ventilator and hand sanitizers are important for fighting COVID, and that the rate recommended for both these items was on the higher side. Fie stated that he would like to see that the rates on both these items was brought down to 5%, so that they can be used extensively. He stated that on the proposal by Sikkim that items such as pharmaceutical sector should not be touched, as that was the area which would make available all medicines to fight COVID. He stated that if we impose COVID cess on these sectors, it would defeat the goal of making available COVID 19 related items cheaply. He stated that if we are to levy this cess, it should he on item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be included in the new exemptions which are a part 11(i)A of the agenda. He proposed exemption on goods imported on purchase for donation would cover cases where donation was made to Central Government, State Government or to any relief agency on the recommendation of State nodal authority. As regards vaccines, he stated that the vaccines are either purchased by the Centre, the States or by private hospitals. When they are purchased by the Centre or the State, the Centre or the State pays tax on them, and the tax comes back to the Centre and State. Even in calculation, almost an equal amount was coming back to the Centre and the State. In reference to private hospital, the end price was not fixed, so that the benefit was not being passed onto the consumer, and that it would lead to more profits for the hospital. He said that ventilators are purchased by institutions and not individual. In cases where they are purchased by government hospitals, the same logic as that of vaccines applies, and where they are purchased by private hospitals, the benefit will not be passed on to the final patient. Further, he stated that as soon as concessions are given for hand sanitizers, similar de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestically or purchased from outside the country or whether it was gifted by someone. As far as drugs are concerned, a view has been taken that medical grade oxygen, oxygen concentrator, pulse oximeter and COVID test kits will be taxable at reduced rate from 12% to 5%. The applicable rate was mentioned till 31 st July but now all these benefits shall be available till 31 st August with the delegation to the Union Finance Minister that at any stage, if further extension was required and the GST Council meeting was not scheduled soon, she may extend that date. 15.32 Regarding the item No. 11(ii), there is a tablet Diethylcarbamazine which is used for Lymphatic Filariasis and it is distributed through WHO; its rate shall be brought down from 12% to 5%. Re-import of goods send abroad for repair attract IGST on the value addition only. However, Tribunal has interpreted that IGST does not apply to such value. Proposal was to clarify this. The concessional rate of 12% shall be applicable on laterals and parts of sprinkles and drip irrigation systems which fall under the heading 8424. However, other items which do not fall under the heading 8424 would attract the lGST rates which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistive devices it has been agreed to retain GST at 5%. Further, items No, 11(v) was on the ice cream for the composition scheme, which was mentioned by JS (TRU) in his presentation, it has been Suggested that rather than just examining the ice cream, the Fitment committee would actually examine all such commodities where the value addition was very large an give a Consolidated recommendation So, these are the decisions that have been taken fc items n agenda No.11. 15.35 The Hon ble Member from West Bengal Stated that there was nothing on the tax rate on ventilator, hand sanitizer and temperature checking devices. He stated that he made a proposal for zero rating and modified that by saying that it may be Considered at 0.1 %. He stated that lie would humbly like to register his dissent as even the tax rate of 0.1 % proposed by him was not being considered. 15.36 The Secretary reiterated that if the benefit was given to the ventilators, it was the intermediary who was given the concession and it does not reach the final Consumer. Suppose, a private hospital takes the ventilator and a concession was given to it, it was not necessary that the benefit will be passed on to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 4.5 to the Centre. It was almost a zero- sum game. There may be some difference between State A, State B and State C and similarly, the things that are purchased in the health sector, there are a lot of things that are purchased by the Centre which are also being provided to the States and to the Central Government institutions for which the taxes are completely paid by the Centre. 15.42 The Hon ble Member from Kerala stated that in this pandemic situation, maximum benefits should be extended to the people by both the Centre and the State. The Secretary discussed about the hospital and ventilators that, if they purchased the ventilators, benefits will not be passed on to the common people but oxygen concentrators, oximeters, COVID testing kit, other laboratory materials are being purchased by people for personal use also. So, if the cost was coming down, it will be very good and this benefit was not for an unlimited period but for the next three months only. He further suggested for zero rating 0.1% or 1%. 15.43 The Hon ble Member from Rajasthan stated that if the reduced rates on COVID related items are not considered their dissent may be noted. 15.44 The Hon ble Chai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction of rates as recommended by the Fitment Committee can be implemented. However, if deeper cuts in tax rates are required, the same can be considered after the GoM submits its report. 15.50 The Hon ble Member from Gujarat suggested that till the time, the GoM submits its report; the rate reduction as proposed by the Fitment Committee can be implemented so the benefit of the reduced rates can be given to the people and the relevant notifications should be issued immediately. 15.51 The Hon ble Member from West Bengal stated that the tax reduction benefit should be implemented in integrated manner only after the GoM submits the report. Otherwise, his dissent sticks. 15.52 The Hon ble Member from Punjab suggested that GoM may meet immediately and submit its report on Tuesday. 15.53 The Hon ble Member from West Bengal stated that even with a GoM, the result cannot be predicted. He very earnestly requests that if it cannot be made zero rated because it requires an ordinance, at least the Council may consider 0.1%. He further stated that 18% on hand sanitizer was very high and also on N95 mask and ventilators. He stated that if tax relief was given, it will be passed on d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k into the whole thing and come back within 10 days but she wanted to give weight to the principle which the Council have held very sacred that talk with everybody and go along with everybody s views. She stated that she would rather go with forming a GoM and let the GoM come with its recommendation before the 8 th of June and move on from there. The suggestion of West Bengal, Kerala, Tamil Nadu and Punjab regarding zero rating or 0.1 %, would be considered by the GoM. She suggested that a GoM route was the course which can give some positive outcome and the formation of the GoM may be done at the earliest. 15.61 The Hon ble Member from Bihar stated that on the Agenda 11(i)(A), there was a consensus and it can be passed. 15.62 The Secretary clarified that this (GoM) was only for items in Agenda 11 (i)(B) and not for 11(i)(A). All other items in agenda 11, as proposed in the agenda note and as agreed and recommended by Council would be valid and implemented. 11(iv): Issues placed before the Council in pursuance of directions of the Court - GST rates on assistive devices 15.63 The Secretary requested JS(TRU), Convener, Fitment Committee to apprise the Council about th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental Rights of the disabled. 15.67 The issues raised by the petitioner in his petition was examined in detail and a counter affidavit was filed by the Union Government in the matter. It was apprised by the Union Government to the Hon ble Court that the extent and rate of taxation was an executive function. If the competence of the legislature stands established, the quantum of tax, conditions of taxation form a part of competence of the legislature. The levy of GST at the lowest rate of 5% was defended on the ground that 5% GST rate enable manufacturer to utilize input tax credit and in case of overflow take refund thereof. Exemption would break ITC chain and thus create blockage of ITC. The GST law does not allow refund 01 accumulated ITC on exempted goods for domestic consumption. Hon ble Court was also apprised of international practices which vary from country to country. A few impose GST at lower rates while other exempt and a few zero rate certain supplies for physically handicap. Learned Attorney General appeared on behalf of Union of India. 15.68 Hon ble Supreme Court in its Order dated 26.10.2020 in the present case has made GST Council as a necessary party in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such devices to enable refund of accumulated input tax credit to the manufacturers. In view of Hon ble Supreme Courts directions, the issue was placed before the Council and the Council approved the continuation of present rate structure i.e. 5% on assistive devices. Agenda Item 11(v): Issues placed before the Council in pursuance of directions of the Court -Exclusion of ice cream from composition levy 15.72 The Secretary requested JS(TRU) to apprise the Council about the issue. The Convener, Fitment Committee stated that this agenda note was regarding the direction of Hon ble High Court of Delhi in the matter of Writ Petition No. 5252/2019, MIs Del Small Ice Cream Manufacturers Welfare s Association Vs. Union of India wherein petitioner had challenged exclusion of Ice Cream from the ambit of composition levy under section 10 of the CGST Act. Hon ble Court after consideration of issue has directed that matter be placed before Council for a re-look by the Council. The gist of the issue covered under this Agenda Item was as follows: 15.73 The composition levy covers all goods except those notified by the Government under section 10(2)(e) of CGST Act 2017. The exclusions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the aforesaid two parameters i.e. the components used in the ice cream and the GST payable thereon and other similar goods having similar tax effect Continuing enjoy the benefit. We direct accordingly. 23. The respondent no. 2 GST Council to take up the aforesaid aspect in its next meeting and to take a decision thereon at the earliest, keeping in view that the ice cream season has just begun, and preferably within three months of today. 15.78 Accordingly, the copy of the Order dated 09-02-2021 was placed for consideration of the Council in Volume-4 of the Detailed Agenda Notes. Consequent to this order by Hon ble High Court, the two issues were under Consideration were as under: (a) The components used in the ice cream and the GST payable thereon. (b) Other similar goods having similar tax effect Continuing enjoy the benefit, 15.79 As regards the components used in the ice cream and the GST payable thereon, as per the standard for ice cream, kulfi, chocolate ice cream, etc. issued under Food Safety and Standards (Food Products Standards and Food Additives) Regulations 2011, Ice-Cream, Kulfi, Chocolate Ice Cream or Softy Ice-Cream means the frozen milk (prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice-cream manufacturer milk and cream are the primary inputs (more than 50%) which are exempted from GST. Analysis of Fitment Committee also shows that total tax paid on all inputs was less than 5% of the value of inputs in ice cream manufacturing industry. Hence, ice cream Manufacturer/dealers are required to pay significant portion of their liability in cash as ITC was very low. It was also noticed that the exclusion of Ice Cream from composition levy has significant revenue implications and the issue has been well debated in earlier Council Meetings. In view of Hon ble High Court directions, the issue was placed before the council and the Council has approved the continuation of exclusion of ice cream from composition levy. Considering the observations of Hon ble Court, it was also decided that Fitment Committee shall conduct a detailed study of parameters of coverage of composition scheme, particularly as regards sectors where there was significant value addition and consumption and submit the study report before GST Council Meeting. Agenda Item No.12: Correction of Inverted Rate Structure on textiles and footwear 16.1 The Secretary requested JS (TRU) to make a present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its implication to investment decisions. 16.4 On footwear, it was mentioned that 5% rate covers more than 70% of the segment. This causes an inversion whereby refund involvement in a year was ₹ 2000 Crore. In footwear, the inputs and chemicals and adhesive are at 18% so also the soles, natural or synthetic rubber, elastic polymer, all are at 18%. Only some kind of leather are at 5%, industrial textile was at 12%, input services and capital goods also attract GST of 18%. Overall industry data and inputs figure reveals that there was an inversion of about at least 6% in footwear which means that rate actually should be at around 11-12 % to correct the inversion at minimum. 16.5 JS (TRU) informed the Council that the recommendation of Fitment Committee after due examination was that dual rate for same commodity may not be appropriate and therefore, ideally there should be single rate of footwear which was 18% but, if it was not possible to take those items which are at 5% to 18% because of various other considerations, then the footwear which are having retail sale price upto ₹ 1000 per pair could be taken to 12%, so that inversion in footwear was corrected. He also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call was taken by the council that it may not have been the appropriate time except agreeing to correct rate structure on the mobile phones. In principle, the Council was in favor of correcting inversion in rates at an opportune time. The issue of inverted rate structure has been raised by the members time and again, therefore this agenda has been placed before the Council for taking a view. She observed that Dr. Amit Mitra has raised a very valid point that this may not be the right time. 16.9 The Hon ble Member from Punjab stated that the Fitment Committee very rightly recognized that there was no rationale for differential tax rates today on the basis of value as ( far as footwear was Concerned and this also creates opportunities for tax evasion. So, Punjab was of the view that there was a need to align tax rates uniformly for all footwear and, if 70% of the footwear was of the value of 5% today, why not align rates uniformly, may be at 12% and do a classification-based value. Punjab does not support changes in tax rates in bits and pieces. The time has come and maybe in the next three to six months, there was a need to go in for a comprehensive review of GST rates and exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-one was power loom and another one was handloom and the effect on each of these sectors should be explained and whether handloom was adversely affected with this decision, be made known. If handloom sector was not impacted, they do not have any issue in this regard. Otherwise, their repeated demand was that the existing tax rate of 5% of handlooms should be reduced. 16.14 The Hon ble Chairperson appreciated the concerns of the Members of the Council. The view that emerged as also getting the sense of the Council she thought it appropriate to postpone the decision on the agenda. However, regarding the specific question raised by Odisha that textile has to be looked at in two compartments., the handloom and power loom, she fully agreed to the point and assured the department shall get the details and share it with all Hon ble members so that the Council has better information whenever they have to take a call on the Issue. Agenda Item 13: Applicability of Goods and Services Tax on Extra Neutral Alcohol 17.1 The Secretary to the Council stated that the issue of applicability of GST on Extra Neutral Alcohol (ENA) has already been discussed in the earlier GST Council Meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed by the manufacturers/suppliers and this was leading to a situation where some distillers are paying GST on it, some are paying VAT on it whereas others are paying State excise duty. There are also instances where distillers are neither paying VAT nor State excise duty. In some cases, they have gone to Courts to take advantage of the situation as the issue does not have clarity. These kind of divergent practices have implications on the Revenue. Since Supreme Court clearly held that it was an industrial input and not an item used for human consumption and hence was not covered by the State list for taxation. Therefore, this needs to be resolved quickly based on the clear pronouncement of Supreme Court. Therefore, the matter was placed before the Council to take a view on this so that confusion, which was pending for last 3 years in status quo mode without having been finalized, can be resolved. 17.4 The Hon ble Member from Andhra Pradesh stated that this issue has been in discussion since the 20 th GST Council Meeting and Andhra Pradesh has been involved in the discussions from the beginning. ENA is generally of two types. One is denatured and other is un-denatured. So, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Over the taxation authority was actually either in the Constitution or in the GST list, it was basically usage. So, when originally it was intended to give power to the States to tax alcohol for human consumption, then it was not correctly represented in the Opinion of the Learned Attorney General. At the same time, the authority of the State to tax after the GST implementation has drastically come down. Further, in many States, excise was one area where States have some sort of leverage and some sort of authority and power to tax to suit the need of the state requirement. This has been very clearly mentioned in the 15 th Finance Commission recently that whereas the resources to the Union was about 62.7% the States is 37.3%, the expenditure of the Union is 37.6% the States 62.4%. This was almost exactly Opposite to the resources expenditure. Similarly, looking at the share of States taxes by devolut ion approx. after cesses and surcharges has been sizably increased the Centre s gross tax revenue has increased because cess and surcharge increased from 2.3% in 1980-81 to almost 15% in 2019-20. While the State s share has gone up from 28% in 2012-13 to 32%, devolution an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um products alcoholic products will be retained by the State. He further submitted that State was not a party in the Supreme Court decision. One case can t be adopted in other case and in this case, the decision was passed ex-parte. Most states are not party to the decision, so it was not binding and as Andhra Pradesh said that on entry number 25 i.e. denatured spirit, they don t have any objection. Denatured spirit is under GST and ENA is only material for making Alcohol. He stated that ENA is a raw material for making alcohol but no second product can he made from ENA. As one can make any product from denatured spirit so Odisha doesn t have any objection if GST was imposed on denatured spirit. The states have power to impose tax on alcohol and petroleum only. He submitted before the Council that status quo be maintained and issue can be discussed further. He suggested filing review petition before the Supreme Court as it was an ex-parte order. He submitted before the Council that status quo may be maintained on levy of VAT by the State on ENA when sold for production of alcoholic liquor for human Consumption only. 17.6 The Hon ble Member from Arunachal Pradesh stated that Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s hanging on for quite some time from earlier council meetings. There was always going to be resistance from the States on this issue because they will lose revenue. He stated that one has to take a decision considering the Supreme Court Ruling as well as the opinion of the Learned Attorney General in this matter. He suggested for constitution of a GoM for this matter and after due deliberations by the GoM along with their recommendations, this matter should come to the council within a limit time to have finality. Otherwise, this issue will continue to remain because there was the case of ENA which was not for human consumption and one which leads to human consumption because it was converted into different types of whisky and other alcoholic drinks. 17.9 The Hon ble Member from Kerala stated that this was a serious issue. He stated that the ENA was generally used for making Liquor. Generally, denatured alcohol only was covered under GST while the two items alcohol petroleum are the only ones left with the States. Therefore, irrespective of technical details or whatever things legal experts are saying, Council has to look into real issue faced by the States. He further said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the states was coming down year on year, He submitted to defer this as this was the state subject and in practice also ENA was diluted normally before it can be used for human consumption He Sincerely requested that as almost all the Ministers /States are requesting the Hon ble Chairperson that this subject be kept with the States. 17.13 The Hon ble Member from Punjab stated that what was more relevant than what Hon ble Court has said and opinion of Hon ble Attorney General was that how the Council wishes to define this term. He stated that GST Constitutional bill was introduced in 2014 and Council had to take into account the popular understanding of the issue and the true scope of ENA. He stated that the Central Government surely believes that it was not excisable and left the entry blank in the Central Excise Tariff and States were levying VAT or Excise. He stated that in the interest of time and gravity of the issue, he agrees with the rest of the states that ENA should be kept out of GST. 17.14 The Hon ble Member from Madhya Pradesh stated that if GST was levied then the producers will not get input tax credit. Secondly, the alcohol will become more expensive under G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e can be a Council meeting on this one agenda. She further stated that we can have one agenda meeting on July, 2022 and after, where revenue can be discussed and how we plan to take it further. She responded to Punjab that she will definitely have One completely dedicated session for it at the earliest. Agenda Item 15: Decisions/recommendations of the 14 th meeting of IT Grievance Redressal Committee for the information of the Council along with an agenda for the decision of the Council 19.1 The Secretary stated that the 14 th meeting of the IT Grievance Redressal Committee (ITGRC) was held on 4 th March, 2021 to resolve grievance of the taxpayers arising out of technical problems faced by them on GSTN portal in relation to filing of TRAN-1, TRAN-2 and migration to GST along with a case of non-technical nature. 19.2 The agenda for the 14 th ITGRC meeting had total 66 cases Pertaining to TRAN-1/Tran-2/migration comprising 43 Nodal officer cases, 22 court cases (including one migration tion case of M/s Guru Shoes Components) and 1 non-technical case of M/s Vellath Steel Agencies. 19.3 Recommendations of the ITGRC (i) The ITGRC had recommended the 5 court cases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with request for its decision/ directions regarding cases recommended by ITGRC aid also in respect of the clarity sought by ITGRC as mentioned above. 19.6 The Council took note of the decisions/recommendations of the 14 th Meeting of the ITGRC and (a) approved the 24 cases recommended by the ITGRC. Further, (b) Council noted that the due date was over on 31.08.20 and it was presumed that by this time which was nine months from the due date, the nodal officers would have sent all the cases and the option can therefore be closed and the 4 cases still remaining with GSTN as indicated above can be taken up. Agenda Item 15 A: Minutes/Detailed reasons in respect of 26 cases approved in principal and 78 cases rejected (total 104 in the 42 nd meeting of the GST council pertaining to 13 th ITGR 20.1 The Secretary stated that the 13 th meeting of the ITGRC was held on 01.09.2020 to resolve grievances of the taxpayers arising out of technical problems in filing TRAN-1, TRAN-2 and migration cases. In the meeting, out of the 104 cases presented by GSTN, 26 cases were falling under category A where technical glitches were found and they were recommended and 78 cases fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the States on a back-to back basis with an average interest rate of 4.85%. 22.2. It was submitted to the Council that if a view was taken to extend the same arrangement as last FY 2021-22 on the same principles for the current financial year 2021-22 also, the estimated amount calculated based on the normative growth of 7% on the revenues of FY 2019-20, that would have to be borrowed and passed on to the States as loan on a back- to-back basis would be ₹ 1,58,267 crores as shown in the detailed Agenda Notes. 22.3. It was further explained that if the projected monthly gross GST Revenue collection during FY 2021-22 was taken as ₹ 1.1 lakh crore, the actual gap would be about ₹ 1.5 lakh crores and if the projected monthly gross GST Revenue collection during FY 2021-22 was ₹ 1.15 lakh crore, the actual gap would be about ₹ 1.25 lakh crore. 22.4. It may be recalled that the GST Council in its 42 nd meeting approved the proposal to extend the levy of compensation cess beyond June 2022 till the entire shortfall is covered. It was further submitted to the Council that the compensation cess amount collected during the FY 2021-22 would be release ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they should be made good during the current year. He stated that the issue of compensation entitlement to States, which will end in 2022, needs to be discussed in detail. He also requested that the loan may be treated as a grant and the change of account heads as a special case needs to be taken up and addressed with State AG so that their State finances will not be affected because it being Considered as a public debt. 22.9. The Hon ble Member from Tamil Nadu stated that the second wave of COVID was on them and they have a very correlated pro-cyclical risk and its worth thinking bit more deeply on managing this risk. The States require more compensation He was sure that the Hon ble Chairperson would do that at the right time. 22.10. The Hon ble Member from Kerala stated that the growth rate was assumed to be 7% but practically, there was a negative growth. He requested for a further five-year period extension for levy of cess. He also requested that the arrears of compensation to Kerala State of an amount of ₹ 4,077 Cr. may be paid to them immediately 22.11. The Hon ble Member from Punjab reminded that while disbursing the borrowings of ₹ 1.1 lakh crores given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... airperson to increase the limit under FRBM Act for the States from 3% to 5% in FY 2021-22 as it was done in the last year. He also requested the Hon ble Chairperson to settle the pending IGST amount by releasing ₹ 218 crores to Telangafla State. He also requested that this FY 2021-22, full compensation to States may be extended. 22.16. The Hon ble Member from Gujarat stated that since the compensation and loan for the year 2020-11 is already given, the decision for the year 2020-21 may also be taken. He requested for devising a mechanism through RBI or any other suitable manner for loan in the current financial year. He said that remaining amount of compensation may also be considered for payment through loan in the coming years. 22.17. The Hon ble Member from Odisha informed that they had received a loan of ₹ 3,822 crores through back-to-back arrangement last year. ₹ 3,580 crores of compensation was still outstanding for Odisha. He requested Hon ble Chairperson to continue this back-to-back loan arrangement in the ensuing FY. 22.18. The Joint Secretary, DoR clarified that 7% was not the estimated growth rate but was a normative growth rate that was assu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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