Minutes of the 50th Meeting of the GST Council held on 11th July, 2023
The 50th meeting of the GST Council was held on 11th July, 2023 under the Chairpersonship of the Hon’ble Union Finance Minister, Smt. Nirmala Sitharaman at Vigyan Bhawan, New Delhi. The list of Hon’ble Members of the Council who attended the meeting is at Annexure-1. The list of the officers of the Centre, States, Union Territories with legislature, GST Council Secretariat and GSTN who attended the meeting is at Annexure-2.
1.2 The following agenda items were listed for discussion in the 50th meeting of the GST Council:
TABLE OF CONTENTS
| SI. No. | Agenda Item |
| l. | Confirmation of Minutes of 49th GST Council Meeting held on 18th February, 2023 |
| 2. | Ratification of the Notifications, Circulars and Orders issued by the GST Council and decisions of GST Implementation Committee for the information of the Council |
| 3. | Issues recommended by the Law Committee for the consideration of the GST Council |
| i. Rules Amendment in accordance with the recommendations made by Group of Ministers (GoM) on implementation of E-way bill requirement for movement of Gold/ Precious stones under chapter 71. | |
| ii. Capacity based taxation and Special Composition Scheme in certain Sectors in GST. | |
| iii. Clarification on charging of interest under section 50(3) of the CGST Act, 2017, in cases of wrong availment of IGST credit and reversal thereof | |
| iv. Issues pertaining to interpretation of Section 10 of IGST Act, 2017 | |
| v. Clarification with respect to applicability of e-invoice w.r.t. supplies made by a registered person to Government Departments or establishment/ Government agencies / local authorities/ PSUs registered solely for the purpose of TDS | |
| vi. Clarification on refund related issues | |
| vii. Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 0 1.04.2019 to 31.12.2021 | |
| viii. Mechanism to deal with differences in ITC between GSTR-2B and GSTR-3B, along with draft rules and proposed FORM DRC-0lC for implementing the same | |
| ix. Procedure for Recovery of Tax and Interest in terms of Rule 88C(3) | |
| x. Annual Returns for FY 2022-23 | |
| xi. Amendment in CGST Rules, 2017 regarding registration | |
| xi(a) Pilot Project for biometric-based Aadhaar authentication of registration applicants in Puducherry | |
| xii. Clarification on TCS liability under Sec 52 of the CGST Act, 2017, in case of multiple E-commerce Operators (ECOs) in one transaction | |
| xiii. Clarification on availability of ITC in respect of warranty replacement of parts and repair services during warranty period | |
| xiv. Amendments in CGST Rules consequent to amendment in CGST Act vide Finance Act 2023 | |
| xv. Goods and Services Tax Appellate Tribunal (Appointment and Conditions of Service of President and Members) Rules, 2019 | |
| xvi. Seeking clarity on taxability of share capital held in subsidiary company by the parent company | |
| xvii. Amendment in CGST Rules, 2017 | |
| xviii. Proposal to provide a special procedure to file appeal against the orders passed in accordance with the Circular No. 182/14/2022-GST, dated 10.11.2022, pursuant to the directions issued by the Hon’ble Supreme Court in the Union of India v/s Filco Trade Centre Pvt. Ltd. | |
| xix. Issues pertaining to ISD mechanism and taxability of services provided by one distinct person to another distinct person | |
| 4. | Recommendations of the Fitment Committee for the consideration of the GST Council |
| a) Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to goods -Annexure-I | |
| b) Issues where no change has been proposed by the Fitment Committee in relation to goods – Annexure-U | |
| c) Issues deferred by the Fitment Committee for further examination in relation to goods – Annexure-III | |
| d) Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to services – Annexure-IV | |
| e) Issues where no change has been proposed by the Fitment Committee in relation to services – Annexure-V | |
| f) Issues deferred by the Fitment Committee for further examination in relation to services – Annexure-VI | |
| g) Recommendations of Fitment Committee on positive list of services to be specified m Sr. No. 3/3A of Notification No. 12/2017-CT(R)) dated 28.06.2017 | |
| 5. | Second Report of the Group of Ministers (GoM) on Casinos, Race Courses and Online Gaming |
| 6. | Recommendations of the l 8th & 19th IT Grievance Redressal Committee for approval/decision of the GST Council |
| a. Decisions/recommendations of the 18th meeting of the ITGRC | |
| b. Decisions/recommendations of the 19th meeting of the ITGRC | |
| 7. | Scheme of budgetary support under GST regime in lieu of earlier excise duty exemption schemes to eligible manufacturing units under different Industrial Promotion Schemes of the Government of India |
| 8. | Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act, 1962 to be placed before the GST Council for information. |
| 9. | Report of 3rd Meeting of the Group of Ministers (GoM) on GST System Reforms |
| 10. | Proposal for creation of State Co-ordination Committee comprising of the GST authorities from the State and the Central Tax Administrations |
| 11. | Implementation of GSTAT consequent to passing of Finance Act, 2023 |
| 11. (Addendum) | Addendum to Annexure-A of the Agenda item 11 |
| 12. | Performance Report of Competition Commission of India (CCI) for month of December, 2022 and 4th quarter of the F.Y 2022-23 along with Performance Reports of State Level Screening Committee (SLSC), Standing Committee (SC) and Directorate General of Anti-Profiteering (DGAP) for 3rd quarter and 4th quarter of the F. Y 2022-23. |
| 13. | Request for extension of due dates for filing GSTR-7, GSTR-1 & GSTR-3B for the months of April, May and June 2023 and extension of Amnesty Schemes in the State of Manipur |
| 14. | Review of revenue position under Goods and Services Tax |
| 15. | Any other agenda with the permission of the Chair |
1.3 The Secretary to the GST Council, welcomed all the Hon’ble Members of the Council and participating officers to the landmark 50th meeting of the GST Council.
1.4 The Secretary on behalf of the Council welcomed the following incoming Hon’ble Members to the 50th Meeting of the GST Council
a. Ms. Atishi Marlena, Finance Minister, Delhi
b. Shri Krishna Byre Gowda, Minister for Revenue Department, Karnataka
c. Sh. Sudhir Mungantiwar, Hon‘ble Minister of Forests, Maharashtra
d. Shri A. T. Mondal, Cabinet Minister, Community and Rural Development, Power and Taxation Departments, Meghalaya
e. Shri K. G. Kenye, Minister for Power and Parliament Affairs, Nagaland
f. Shri Bikram Keshari Arukba, Minister for Finance, Odisha
g. Shri Thangam Thennarasu, Minister for Finance and Human Resource Management, Tamil Nadu
1.5 The Secretary informed the Council that a short film titled ‘GST Council: 50 steps towards a journey’ has been prepared by GST Council Secretariat in collaboration with Directorate General of Taxpayer Services, CBIC. The film was screened with the permission of the Hon’ble Chairperson. The Secretary informed that the film has been prepared in Hindi, English and various regional languages.
1.6 Further, the first set of a special postal cover and customized my stamp designed by the GST Council Secretariat through Department of Posts was presented by Smt. Manju Kumar, Chief Post Master General (CPMG), Delhi to the Hon’ble Chairperson of the GST Council to mark the occasion. All Hon’ble Members joined the release ceremony. The Secretary thanked the CPMG, Delhi and her team.
1.7 The Secretary stated that a GoM on Casinos, Race Courses and Online Gaming was formed to examine the issue of valuation of services and related aspects with Sh. Conrad Sangma, Hon’ble Chief Minister, Meghalaya as Convenor and Hon’ble Members from Maharashtra, West Bengal, Gujarat, Goa, Tamil Nadu, Uttar Pradesh and Telangana as Members. The GoM had submitted its 2nd report which was being placed before the Council for deliberations. He thanked all the Hon’ble Members of this GoM for their valuable recommendations.
1.8 The Secretary further stated that the GoM on GST System Reforms had submitted the report of its third meeting which was being placed before the Council for deliberations. He thanked the Hon’ble Convenor of this GoM from Maharashtra and other Hon’ble Members of this GoM from Haryana, Delhi, Assam, Andhra Pradesh, Odisha, Tamil Nadu and Chhattisgarh.
1.9 The Secretary informed the Council that a National Coordination Meeting was held on 24th April, 2023 with the officers from Center, States, Union Territories, GST Council Secretariat and G$TN wherein various issues on greater coordination on GST administration and sharing of best practices by both Center and states were discussed. The agenda of this meeting involved greater use of technology for GST compliance and tackling tax evasion. One of the outcomes of this meeting was All India drive against fake registrations from 16th May, 2023 to 15th July, 2023. The coordinated effort from both Central and State GST administrations had yielded excellent results. He appreciated the outstanding efforts and excellent performance of both the State and Central GST officers.
1.10 The Secretary also appreciated the efforts of the State and Central GST administrations in revenue augmentation as the revenue in first quarter of 2023-24 was 12 % higher than the revenue in same period for 2022-23.
1.11 The Secretary informed that the agenda for the 50th meeting of the GST Council was discussed in detail during the Officers Meeting a day before which would help immensely in steering the agenda today.
1.12 The Secretary sought the permission of the chair to begin deliberations on each agenda item.
2. Agenda Item 1: Confirmation of the Minutes of the 49th Meeting of the GST Council
2.1 The first agenda item pertained to confirmation of the minutes of the 49th Meeting of the GST Council which was held on 18th February, 2023 at New Delhi. The Secretary stated that the minutes were circulated to all Hon’ble Members and suggestions were received from States of Haryana and Tamil Nadu. The minutes of the 49th meeting of the GST Council after incorporating the changes suggested by the States were placed before the Council for confirmation.
2.2 The Hon’ble Member from Tamil Nadu stated that the suggestions made by the former Finance Minister of Tamil Nadu during the last meeting have. not been incorporated. In regard to selection of Technical Members for GST AT Benches, the States should be taken into account keeping in view the spirit of federalism. The State Search-cum-Selection Committee should be empowered to select both the Judicial Members and Technical Members of the State Bench. The present system will pose a herculean task for the Centre. The Secretary clarified that the agenda item was discussed in detail, and it was agreed that a draft would be prepared by the Secretariat and circulated. The Chairperson was authorized to take a final view. The minutes have been recorded accordingly. Action was also taken accordingly – a draft law was prepared, it was circulated, comments received and incorporated and then approval of the Chairperson taken. The final draft Act has also been circulated to States, based on which they have taken actions such as passing the State Act. The Hon’ble Member from the State of Tamil Nadu reiterated that the State Search-cum-Selection Committee should be empowered for selection of both the Judicial Members and Technical Members of the State Bench. The Secretary stated that the same would be recorded. He requested that minutes be approved
Decision: The Council adopted the Minutes of the 49th meeting of the GST Council.
3. Agenda item 2: Ratification of the Notifications, Circulars and Orders issued by the GST Council and decisions of GST Implementation Committee for the information of the Council
3.1 The Secretary took up the next agenda pertaining to the Ratification of the Notifications, Circulars and Orders issued by the GST Council and decisions of GST Implementation Committee for the information of the Council (Page 92-104 of the agenda). He stated that this agenda was discussed in the officers meeting held yesterday and there was consensus. He requested the Council to ratify the Notifications, Circulars and Orders issued by the GST Council and take note of the decisions of the GST Implementation Committee (GIC).
Decision: The Council ratified the Notifications, Circulars and Orders issued by the GST Council and took note of the decisions of GST Implementation Committee.
4. Agenda Item 3: Issues recommended by the Law Committee for the consideration of the GST Council
4.1 The Secretary took up the next Agenda for the consideration of the GST Council. He informed that these agendas were discussed in the Officers’ Meeting held on 10th July, 2023 and there was an agreement among the all officers on most of the issues. Then, the Principal Commissioner, GST Policy Wing made the detailed presentation (attached as Annexure-3) giving overview of the recommendations made by the Law Committee, as well as the gist of the discussions held in the Officers’ meeting on 10th July 2023.
Agenda Item 3(i): Rules Amendment in accordance with the recommendations made by Group of Ministers (GoM) on implementation of E-way bill requirement for movement of Gold/ Precious stones under Chapter 71
4.2 Pr. Commissioner, GST Policy informed that the as per the recommendation of GoM regarding amendment in Rules for implementation of E-Way Bill requirement for movement of Gold/Precious stones, Law Committee has recommended insertion of Rule 138F in the CGST Rules 2017 as well as in SGST Rules, 2017 for those States who want to mandate the requirement of e-way bill for intra-state Movement of gold and precious stones under Chapter 71 as specified at SI. No. 4 and 5 of the Annexure appended to sub rule 14 of Rule I 38. He also mentioned that this was agreed to in the Officers’ meeting.
Decision: The Council agreed with the recommendations of the Law Committee along with the proposed amendments in CGST Rules, 2017 and in concerned SGST Rules, 2017.
Agenda Item 3(ii): Capacity based taxation and Special Composition Scheme in certain Sectors in GST
4.3 Pr. Commissioner, GST Policy informed that for implementation of the recommendations made by GoM on Capacity based taxation and Special Composition Scheme in certain Sectors, Law Committee has proposed to notify special procedure under section 148 of the CGST Act, 2017 to be followed by the manufacturers of commodities recommended by GoM for registration of the machines, maintenance of records of inputs and production, and submission of special monthly statement. Law Committee has also recommended inse1tion of Section 122A in CGST Act, 2017 to provide for penalty for non-declaration of machines by such manufacturers.
4.4 Law Committee further recommended that the amendment made to Section 16 of IGST Act, 2017 through the Section 123 of the Finance Act, 2021 may be notified for restricting the IGST Refund route in respect of certain supplies or suppliers for exports. Further, tobacco, pan masala and similar items (as recommended by GoM) and mentha oil may be notified under section 16(4) of IGST Act, 2017 as the goods, on the export of which IGST refund route will not be available.
4.5 He also mentioned that this was discussed in Officers’ meeting and was agreed to. Officers also suggested 01. l 0.2023 as the date from which the provisions of Section 123 of the Finance Act, 2021 may be brought into effect.
Decision: The Council agreed with the recommendations of the Law Committee detailed along with the proposed notification and amendments in CGST Act, 2017 and IGST Act, 2017 and recommended to bring the provisions of Section 123 of the Finance Act, 2021 into effect from 01.10.2023.
Agenda Item 3(iii) Clarification on charging of interest under section 50(3) of the CGST Act, 2017, in cases of wrong availment of IGST credit and reversal thereof
4.6 Pr. Commissioner, GST Policy informed that Law Committee has proposed a circular to clarify that in the cases where IGST credit has been wrongly availed and subsequently reversed on a certain date, there will not be any interest liability under Section 50(3) of the CGST Act, if during the time period starting from such availment and upto such reversal, the balance Input Tax Credit in the electronic credit ledger of IGST, CGST and SGST taken together, has not fallen below the amount of such wrongly availed credit. However, if the balance of the electronic credit ledger in IGST, SGST and CGST taken together falls below such wrongly availed IGST credit, then it would amount to utilisation of the wrongly availed IGST credit and will attract interest as per section 50(3) of the CGST Act read with Section 20 of the IGST Act and Rule 88B(3) of the CGST Rules. Law Committee has proposed to clarify the same through a circular.
Decision: The Council agreed with the recommendations of the Law Committee as detailed in the agenda along with the proposed Circular.
Agenda Item 3(iv) issues pertaining to interpretation of Section 10 of IGST Act, 2017
4.7 Pr. Commissioner, GST Policy informed that agenda pertains to clarification regarding the interpretation of Section 10 of the IGST Act for determining the Place of Supply (PoS) in case of goods purchased Over-the-Counter in one State and thereafter transported to another State by the recipient. The issue was discussed in the 37th GST Council Meeting but it was referred back to Law Committee for further deliberation. The Law Committee, after obtaining the opinion of the States, has proposed an amendment in Section 10 of IGST Act for supplies made to unregistered persons, broadly considering the destination-based principle. The recommendation was agreed to in the officer’s meeting.
4.8 The Hon’ble Member from Tamil Nadu suggested that place of supply should be place of supplier citing examples of migrant workers and others who come to the State to purchase something and if they mention the address from where they are coming, then revenue will go to that State where these migrant workers and tourists come from, and hence their State would be deprived of the Revenue.
4.9 The Secretary mentioned that decision has to be taken by the Council. Migration happens either way and people travel in and out of the States. There are disputes about PoS in such over-the-counter supplies. He also informed that the issue came up especially with regard to automobile sector in which residents of a State may travel to another State to take advantage of lower registration charges and road tax, which vary from State to State. To resolve this issue, Law Committee has recommended a new formulation where the unregistered consumers could declare their address on the tax invoice, which would determine the PoS for the said supply. In cases of in-migration, the State may gain but in out- migration it would lose. It is a zero-sum gain. Other than for major goods like automobiles, consumers will not mention their address. So, overall, the losses and gains would not be substantial.
4.10 The Hon’ble Member from Himachal Pradesh thanked the Chairperson stating that the said amendment would benefit smaller States which have very limited resources and that consumer State would get the revenue as per the principle of destination-based taxation.
Decision: The Council agreed with the recommendations of the Law Committee along with proposed amendments.
Agenda Item 3(v) Clarification with respect to applicability of e-invoice w.r.t supplies made by a registered person to Government Departments or establishment/ Government agencies/ local authorities/ PSUs registered solely for the purpose of TDS.
4.11 Pr. Commissioner, GST Policy informed that Law Committee has recommended to clarify through a circular that e-invoicing would be required in all such supplies made by the registered persons, whose turnover exceeds the prescribed threshold for generating e-invoices under Rule 48(4) of the CGST Rules, to the Government Departments or establishment/ Government agencies / local authorities’/ PSUs who are registered solely for the purpose of tax deduction at Source under section 51 of the CGST Act, 2017. He added that this was agreed to in the Officers’ meeting.
Decision: The Council agreed with the recommendations of the Law Committee along with proposed circular for clarification.
Agenda Item 3(vi) Clarification on refund related issues
4.12 Pr. Commissioner, GST Policy further stated that the next agenda 1s regarding clarification on various refund related issues.
4.13 Issue no 1: Refund of accumulated input tax credit (ITC) under Section 54(3) on the basis of that available as per FORM GSTR 2B.
4.14 Pr. Commissioner, GST Policy informed that since the availment of ITC has now been linked with FORM GSTR-2B w.e.f. 01.01.2022, Law Committee has recommended that the availability of refund under Section 54(3) of the CGST Act also needs to be restricted to those invoices which are reflected in FORM GSTR-2B for the concerned or earlier tax periods and on which ITC is available to the applicant. Corresponding amendments have been proposed in the Circular No 135/05/2020-GST dated 31.03.2020 and Circular No.139/09/2020-GST dated 10.06.2020 which would be applicable for refund claims for the tax period January, 2022 onwards.
Decision: The Council agreed with the recommendations of the Law Committee for issuing the said clarification.
4.15 Issue No 2: Requirement of the undertaking in FORM RFD 01 inserted vide Circular No. 125/44/2019- GST dated 18.11.2019
4.16 Pr. Commissioner, GST Policy informed that Law Committee has recommended that in view of the omission of Section 42 of the CGST Act, amendment in Section 41 of the CGST Act and omission of Form GSTR-2 and GSTR-3 from the CGST Rules, 2017, para 7 of the Circular No 125/44/2019 dated 18.11.2019 and its Annexure A are required to be modified to omit the references to the said Section and Rules.
Decision: The Council agreed with the recommendations of the Law Committee for making necessary modifications in the above circular and the Annexure A to the said circular.
4.17 Issue No 3: Clarification regarding determination of value of adjusted total turnover in the formula under Rule 89(4)-
4. I 8 Pr. Commissioner, GST Policy informed that Law Committee has recommended to clarify through the circular that consequent to the Explanation having been inserted in sub – rule (4) of rule 89 of the CGST Rules vide Notification No. 14/2022-CT dated 5.7.2022, the value of goods exports to be included in the calculation of the adjusted Total turnover shall be the same as per the said explanation.
Decision: The Council agreed with the recommendations of the Law Committee, along with the Circular.
4.19 Issue No 4: Clarification on the scope and computation of the refund on account of inverted duty structure as provided in sub-section (3) of section 54 and in rule 89 (5) of the CGST Rules, 2017:
4.20 Pr. Commissioner, GST Policy informed that Law Committee has recommended that clarification be given regarding refund of accumulated input tax credit in cases of inverted duty structure in respect of items like fertilizers, where subsidy is given by the government. Law Committee has recommended that refund will be available in all such cases as long as there is some inversion of tax rate irrespective of the fact that accumulation of input tax credit may also be on account of taxable value of output supply being lower than the value of inputs because of subsidy. Law Committee also recommended that refund be calculated as per the formula prescribed under rule 89(5) of CGST Rules, 2017.
4.21 The Hon’ble Member from Karnataka stated that he had reservations on the recommendation of Law Committee on account of Law and adverse Revenue implications in the State. He further informed that matter is under litigation between their State and concerned companies. He insisted that since the matter is sub-judice, it would not be advisable to take the decision at this stage. He therefore suggested that Council may await the order of the Court on the issue as it would have huge revenue implication of around Rs 300- 500 Crore for the State. However, if the Council strongly felt that a decision needs to be taken on the issue, then the law could be required to be amended and it may not be clarified by issuance of a circular.
4.22 The Secretary suggested that the Council may either refer the matter back to Law Committee or it could be approved so that all authorities actually take a uniform view. He reiterated that it is only a recommendation for the Council to decide but things should not be kept pending for clarification.
4.23 The Hon’ble Chairperson, sought the opinion of the house on the suggestions made by Revenue Secretary
4.24 The Hon’ble Minister of Karnataka agreed to the proposition suggested by the Revenue Secretary.
4.25 The Hon’ble Member from Uttar Pradesh questioned the wisdom of taking a decision on a matter that is already sub-judice. Revenue Secretary informed that though the matter is sub-judice but since it is not stayed, the issue could be decided.
4.26 The Hon’ble Member from Goa mentioned that if the Council waits for the Court orders, then the matter would remain pending. He requested that the issue needs to be clarified at the earliest and therefore, may be referred back to the Law Committee.
4.27 The Hon’ble Member from Chhattisgarh did not agree to the recommendation of Law Committee and stressed that Law Committee should be advised to follow the spirit of legislature and not recommend anything contrary to the provisions of the Act.
4.28 The Hon’ble Member from Meghalaya stated that the reason of litigation is due to lack of clarity in the Law and therefore, Council should not wait for the decision of the Court. He added that the Council should interpret the law and if needed, the Act should be amended for bringing more clarity. He further agreed to the concern raised by Hon’ble Member from Goa.
4.29 The Hon’ble Chairperson directed that in all such cases, where there is lack of clarity in the law, the Law Committee should come up with clarificatory note in time to avoid matter going to the Courts.
Decision: The Council agreed that the issue may be referred back to the Law Committee for re-examination of the same based on the provisions of the law, and after taking inputs from State of Karnataka also.
4.30 Issue No 5: Clarification in respect of admissibility of refund where an exporter applies for refund subsequent to compliance of the provisions of sub-rule (I) of rule 96A.
4.31 Pr. Commissioner, GST Policy explained that the issue pertains to giving the benefit of zero rating in cases where the goods are actually exported or the payment is realised in case of export of services, even if it is beyond the time frame prescribed under rule 96A(l) (a) or 96A(l)(b) of CGST Rules. Law Committee has recommended to clarify through the circular that in such cases, subsequent to the export of goods or realisation of payment in case of export of services, as the case may be, the said exporters would be entitled to refund of the tax paid earlier. The refund may be claimed under “excess payment of tax” and till that functionality is available on the portal, it may be under the category “Any Other”. However, no refund of interest would be given in such cases.
Decision: The Council agreed with the recommendations of the Law Committee along with proposed circular as detailed in the agenda.
Agenda Item 3(vii): Clarification to deal with difference in Input Tax Credit {ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR–2A for the period 01.04.2019 to 31.12.2022.
4.32 Pr. Commissioner, GST Policy informed that guidelines were issued on manner of reconciliation of the difference in ITC availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 2017-18 and 2018-2019 consequent to the decision of the Council in the 48th GST Council Meeting. However, after that, representations have been received for clarification to deal with the difference in ITC availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for the period 01.04.2019 to 31.12.2021. Since rule 36(4) of the CGST rules allowed additional credit to the tune of 20%, 10% and 5% of the eligible credit available in GSTR-2A during the period 9.10.19 to 31.12.19, 1.1.20 to 31.12.20 and 1.1.21 to 31.12.21 respectively, subject to payment of tax by the supplier, therefore, the guidelines are proposed by the Law Committee to be issued for manner of verification and reconciliation of the difference in ITC for the period 01.04.2019 to 31 .12.2021 also. The guidelines recommended by the Law Committee in form of a circular were agreed to in the Officers’ Meeting.
Decision: The Council agreed with the recommendations of the Law Committee along with proposed circular as detailed in the agenda.
Agenda Item 3(viii): Mechanism to deal with differences in ITC between GSTR-2B and GSTR-3B, along with draft rules and proposed FORM DRC-0lC for implementing the same.
4.33 Pr. Commissioner, GST Policy informed that a mechanism is being devised which would allow system-based intimation to the taxpayer about the excess availment of ITC in FORM GSTR-3B vis-a-vis that reported in FORM GSTR-2B, above a particular threshold and with provision for self-compliance on the portal by the said taxpayer. Accordingly, certain amendments in Rules and Forms are required for devising such mechanism. He further, informed that Law Committee has recommended that Rule 88D may be inserted in the CGST Rules to give a system-based intimation to the registered person in those case where difference between the ITC availed as per Form GSTR-3B and that available as per Form GSTR-2B exceeds such amount and such percentage as may be recommended by the Council. In such cases, the registered person shall be directed to pay an amount equal to the said excess amount of ITC availed along with interest or to give a reasonable explanation and if neither of these is done, then the amount can be demanded under Section 73 or section 74. Further, a new clause (e) has been recommended to be inserted in sub-rule 59(6) of CGST Rules to block subsequent GSTR-1 or IFF, unless the said amount has been paid or the requisite explanation has been furnished.
4.34 Law Committee has also recommended to insert a new FORM GST DRC-0IC in CGST Rules as required under sub-rule (1) of the proposed rule 88D.
4.35 Law Committee further recommended that to begin with, such intimation may be given in those cases to the concerned registered person under proposed rule 88D where the difference between the input tax credit availed in FORM GSTR-3B & that available as per FORM GSTR-2B is more than 20% as well as more than Rs. 25 lakhs.
4.36 Pr. Commissioner added that this was discussed in Officers’ meeting and was agreed to.
4.37 The Hon’ble Member from Tamil Nadu suggested that only one criteria of more than Rs 25 lakh should be adopted. Revenue Secretary clarified that it is only the beginning and based on the experience, the threshold could be changed or reduced at later stage. Otherwise, it may cause massive disruption in the business.
The Council agreed with the recommendations of the Law Committee along with . proposed rule and proposed FORM DRC-0lC.
Agenda Item 3(ix): Procedure for Recovery of Tax and Interest in terms of Rule 88C(3).
4.38 Pr. Commissioner, GST Policy informed that in cases where the output tax liability reported in Form GSTR-1 exceeds the output tax liability reported in GSTR-3B and has been communicated to the taxpayer but the amount has either not been paid fully/partially or satisfactory explanation of the difference has not been not given by the taxpayer, or where interest has not been paid by the taxpayer, then, a procedure has been recommended by the Law Committee in those cases for creation of the liability in Electronic Liability Ledger and for recovery of this differential amount by insertion of new rule 142B and a new Form DRC- 01D. He added that in the Officers’ meeting, officer from the State of Gujarat proposed that words “or interest” may be inserted in proposed sub-rule (3) of rule 142B after the words “tax”, which was agreed to by the Officers.
Decision: The Council agreed with the recommendations of the Law Committee, with the amendment proposed by the State of Gujarat, along with proposed rules.
Agenda Item 3(x): Annual Returns for FY 2022-23
4.39 Pr. Commissioner, GST Policy informed that for filing Annual Return for FY 2022- 23, last date of filing is 31.12.2023 and accordingly, FORM GSTR-9 and FORM GSTR-9C for FY 2022-23 need to be notified. Law Committee recommended that the relaxatons provided in FY 2021-22 in respect of various tables of FORM GSTR-9 and FORM GSTR-9C may be continued for FY 2022-23. Law Committee also recommended to insert separate rows for the newly introduced tax rate of 6% (for brick kilns) in table 9, 11 and Pt. V of FORM GSTR-9C. Law Committee further recommended that the filing of annual return (in FORM GSTR-9/9A) for the FY 2022-23 may be exempted for taxpayers having aggregate annual turnover upto two crore rupees, as per the relaxation extended in previous FYs.
Decision: The Council agreed with the recommendations of the Law Committee, along with draft notification detailed in the agenda note.
Agenda 3 (xi)- Amendment in CGST Rules, 2017 regarding registration
4.40 Pr. Commissioner, GST Policy informed that the next agenda 3(xi) is regarding the amendments in CGST Rules 2017 pertaining to registration. He stated that a significant number of cases have been detected where unscrupulous elements have mis-utilized the facility of registration to take fake registration. He mentioned that Law Committee deliberated on the issue and has recommend amendments in various provisions of CGST Rules to strengthen the registration process in GST.
4.41 Amendment in rule 10A: Law Committee has proposed that rule 10A of CGST Rules may be amended to provide that the details of bank account may be required to be furnished within 30 days of the grant of the registration or before filing of statement of outwards supply under section 37 of CGST Act in FORM GSTR-1/ IFF, whichever is earlier.
4.42 Amendment to sub-rule (2A) of rule 21A: Further, Law Committee has proposed that amendment be made in Rule 21A(2A) to provide for system based suspension of the registration in respect of such registered persons who do not furnish details of valid bank account under rule 10A of CGST Rules within the time period prescribed in the said rule. It has also been recommended to provide for automatic revocation of suspension in such cases upon compliance with provisions of rule 10A.
4.43 Amendment to sub-rule (6) of rule 59: Law Committee has further recommended that clause (e) may be inserted in sub-rule (6) of rule 59 to provide that in cases where a registered person has not furnished details of a valid bank account under rule 10A as per provisions of rule 10A, the said registered person may not be allowed to furnish the details of outward supplies in FORM GSTR-1 or using IFF.
4.44 Amendment in CGST Rules regarding physical verification of business premises: The Law Committee also deliberated that the physical verification of business premises needs strengthening in high risk cases. The Law Committee recommended that the requirement of the presence of the applicant for physical verification of business premises may be done away with Further, Law Committee also recommended to make a provision in rule 25 for physical verification in high-risk cases even where Aadhaar has been authenticated. For this purpose, Rule 9(1) and Rule 25 may be amended as proposed in the Agenda.
4.45 Pr. Commissioner added that this was discussed in Officers’ meeting and was agreed to.
Decision: The Council agreed with the said recommendations of the Law Committee.
Agenda 3 xi(a)– Pilot Project for biometric–based Aadhaar authentication of registration applicants in Puducherry.
4.46 Pr. Commissioner, GST Policy informed that the agenda 3 xi(a) is also related to agenda 3(xi) pertaining to registration. He stated that Council had already agreed to have a biometric based Aadhaar authentication in high risk cases and pilot was approved for State of Gujarat. Puducherry has also requested to have a pilot for the same implemented in Puducherry. In this regard, approval is needed for issuing the following notifications:
i. The State of Puducherry will need to substitute rule 8(4A) of Puducherry SGST Rules on the lines of corresponding substitution of Rule 8(4A) of CGST Rules vide notification no. 04/2023-Central Tax dated 31.03.2023;
ii. Further, the State of Puducherry will also need to amend rule 8(5) and rule 9 of Puducherry SGST Rules on the lines of corresponding amendments in CGST rules notified vide notification no. 26/2022- CT dated 26.12.2022;
iii. The Central government will be required to further amend Notification No. 27/2022- CT dated 26.12.2022 for specifying that the proviso to rule 8( 4A) will apply to the State of Puducherry as well.
4.47 Further, it was proposed that the Council may authorize the Chairperson to extend the said pilot project, if required, in other States and/ or Union territories which may be willing to conduct pilot for biometric authentication of Aadhaar for high-risk registration applicants.
4.48 The Hon ‘hie Member from Andhra Pradesh stated that they are also interested in taking up this pilot project, which was agreed. The Revenue Secretary agreed to the same.
4.49 Pr. Commissioner, GST Policy stated that amendments in rule 8(5), rule 9(1) and rule 9(2) of CGST Rules 2017 have been notified by the Centre and State of Gujarat, but other States are also required to notify the same so that mandatory physical verification can be conducted in high-risk category identified by the Common portal, despite having Aadhaar authenticated.
4.50 He added that this was discussed in Officers’ meeting and was agreed to.
Decision: The Council agreed with the said recommendations made in the agenda as also to the request of Andhra Pradesh to include it in the pilot for biometric Aadhar based authentication.
Agenda 3 (xii)- Clarification on TCS liability under Sec 52 of the CGST Act, 2017, in case of multiple E-commerce Operators (ECOs) in one transaction
4.51 Pr. Commissioner, GST Policy informed that the agenda 3(xii) is a circular for clarification regarding TCS liability in the cases involving multiple electronic commerce operator, especially in the case of Open Network Digital Commerce platform. The Law Committee recommended that it may be clarified through a circular that in a situation where multiple ECOs are involved in a single transaction through ECO platform, the compliances under section 52 of CGST Act, including collection of TCS, is to be done by the supplier-side ECO who finally releases the payment to the supplier for a particular supply made by the said supplier through him.
4.52 He also added that an in-principle approval was granted by GST Council in 47th meeting inter alia for waiver of requirement of mandatory registration under section 24(ix) of CGST Act for person making intra-state taxable supply of goods through ECOs, subject to certain conditions. In order to implement the same, issuance of notifications under section 23(2) and section 148 of CGST Act, 2017 has also been recommended by the Council in its 48th meeting. As per the recommendations of the Council, the same is to be implemented w.e.f. 01.1 0.2023. However, it is felt that the said draft notification also needs to cover the situations involving model of multiple ECOs in a single supply of goods through ECO platform. Law Committee recommended that the said draft notification, as approved by the Council, may be amended further to provide for situations involving multiple ECOs, as suggested in Annexure B to the agenda.
Decision: The Council agreed with the said recommendations of the Law Committee, along with the circular and notification-.
Agenda 3 (xiii)- Clarification on availabilitv of ITC in respect of warranty replacement of parts and repair services during warranty period.
4.53 Pr. Commissioner, GST Policy informed that the agenda is regarding a clarification in respect of those cases where the manufacturer provides warranty replacement or repair services for some items during the warranty period without any additional consideration. Issues were raised whether in these cases, the supply of replacement parts is liable to tax or not or whether ITC is required to be reversed or not. Therefore, a clarification has been recommended by the Law Committee in form of a circular to cover various scenarios.
Decision: The Council agreed with the recommendation of the Law Committee to issue the clarificatory circular.
Agenda 3 (xiv)- Amendments in CGST Rules consequent to amendment in CGST Act vide Finance Act 2023
4.54 Pr. Commissioner, GST Policy Wing informed that this agenda is regarding amendment to CGST Rules subsequent to amendment in CGST Act carried out through Finance Act, 2023.
4.55 Rule corresponding to the Explanation to section 17(3) of CGST Act, 2017: The Law Committee recommended that the activities or transactions of paragraph 8(a) of Schedule III of CGST Act, the value of which shall not be excluded from exempt supply as per amended Explanation to sub-section (3) of section 17 of CGST Act, 2017, need to be prescribed by amending CGST Rules, 2017 by way of Insertion of Explanation 3 to rule 43 of the CGST rules.
4.56 Amendment to rule 162 of CGST Rules 2017: Subsection (2) of section 138 of CGST Act, 2017 provides for prescribing the amount for compounding various offences under CGST Act through CGST Rules, 2017. Therefore, Law Committee has recommended that sub-rule 3A may be inserted in rule 162 of CGST Rules to prescribe compounding amount for various offences.
Consent Based Sharing of Information
4.57 To implement the provisions of the newly inserted section 158A of CGST Act, rules need to be framed and implemented. The Law Committee has recommended insertion of new Rule l 63 in CGST Rules, 2017 for the purpose of consent-based sharing of data available on the common portal with other systems.
4.58 The Law Committee has also recommended that account aggregators may be notified as the systems with which information may be shared by the common portal based on consent under Section 158A of the CGST Act, 2017. The draft notification under section 158A of CGST Act in this regard is enclosed as Annexure-II with the agenda note.
4.59 Pr. Commissioner, GST Policy further mentioned that Council needs to fix the date on which provisions of Finance Act, 2023 pertaining to GST will come into effect. He informed that the issue was deliberated in the Officers’ meeting and it was suggested that 01.08.2023 may be fixed as the date on which provisions of the Finance Act, 2023 pertaining to GST Appellate Tribunal may be notified by the Centre at least, so that the work for setting up of Tribunals can be initiated at the earliest. Further, it was suggested in Officers’ meeting that all other provisions of the Finance Act, 2023 may be notified with effect from 01.10.2023.
Decision: The Council agreed with the said recommendation of the Law Committee, along with the suggestions made in Officers‘ meeting regarding date from which provisions of Finance Act, 2023 will come into effect.
Agenda 3 (xv)– Goods and Services Tax Appellate Tribunal (Appointment and Conditions of Service of President and Members) Rules, 2019.
4.60 Pr. Commissioner, GST Policy informed that Agenda 3 (xv) is regarding Goods and Services Tax Appellate Tribunal (Appointment and Conditions of Service of President and Members) Rules, 2019. He informed that the draft rules as recommended by Law Committee are detailed in the agenda. He added that the issue was deliberated in detail in Officers’ meeting, wherein officer from State of Maharashtra suggested that in sub rule 5 of proposed rule 3 of the said Rules, the word “as well as adjudicating” may be replaced by the word “and” and that Sr. No. 9 of Annexure-1 of the said Rules may be deleted. The same was agreed by the Officers.
Decision: The Council agreed with the said recommendation of the Law Committee, along with the amendments suggested in the Officers’ meeting. Agenda 3 {xvi)- Seeking clarity on taxability of share capital held in subsidiary company by the parent company.
4.61 Pr. Commissioner, GST Policy stated that the Agenda is about clarity on the issue of taxability of share capital held in subsidiary company by the parent company. but the Law committee deliberated on the issue and has recommended to clarify through a circular that mere holding of the shares of subsidiary company by the holding company cannot be treated as supply of services by the holding company to the subsidiary company and cannot be taxed under GST accordingly.
4.62 The Hon’ble Members from Karnataka and Chhattisgarh requested to explain the proposal in greater detail.
4.63 Pr. Commissioner, GST Policy informed that the issue is regarding clarification as to whether holding of shares in a subsidiary company by the parent companies to be treated as supply of service under GST or not. Field formation are raising demand that the share capital held in subsidiary companies are covered under SAC code 997171 and accordingly leviable to GST. As securities are neither treated as goods nor treated as services, mere holding of shares of subsidiary company by the holding company cannot be treated as supply of services. However, there may be independent supply of other services by holding company to subsidiary company like providing a bank guarantee, etc.
4.64 The Hon’ble Member from Karnataka agreed to the recommendation. However, he felt that Law Committee should examine the issue of taxability of other activities/ services by holding company for subsidiary company. He further suggested that the circular may mention that ‘other advantages or services will be looked into separately”.
4.65 The Hon’ble Members from Meghalaya and Uttar Pradesh stated that the proposal of the Law Committee is only clarifying that the mere holding of securities of a subsidiary company by holding company cannot be treated as supply of services and there is no ambiguity in it, and therefore, there is no need for any amendment in the said proposed circular.
4.66 The Hon’ble Chairperson concluded the discussion by advising that while the issue of other advantages and services may be looked into separately, mentioning the same in the circular may lead to further litigation.
Decision: The Council agreed with the said recommendation of the Law Committee along with the circular. Law Committee will further examine the issue w.r.t. other advantages and services provided by companies to its subsidiaries.
Agenda 3 (xvii)-Amendment in CGST Rules, 2017
4.67 Pr. Commissioner, GST Policy stated that the Agenda is about various amendments in CGST Rules. He added that that a number of these amendments are just procedural in nature for alignment with various provisions requiring change or omission.
4.68 Following amendments in CGST Rules have been proposed as detailed in the Agenda:
1. Omission of clause (c) of Explanation (1) to Rule 43: This is an amendment consequential to lapsing of an exemption.
2. Amendment in proviso to rule 46(f): Law Committee has recommended that proviso to rule 46(f) of CGST Rules may be amended to provide that the tax invoice may contain the name of the State of the recipient only and the name and address of the recipient along with its PIN code may not be mandatory to be declared on the tax invoice.
3. Amendment in Rule 64 and FORM GSTR-5A: Law Committee has recommended amendment in rule 64 and in FORM GSTR-5A so as to also include details of supplies made by the OIDAR service provider located outside India to registered persons other than hon-taxable online recipient in India in his return for tracking of payment of tax on RCM basis by registered taxpayers.
4. Amendment in rule 89(1): Law Committee recommended to align the wording of the third proviso of rule 89(1) with the Section 49(6) so that the casual taxpayer can fi le his refund claim for the balance remaining out of the advance tax paid which is in the nature of excess balance in electronic cash ledger only and which can be claimed as refund after filing of the last return.
5. Amendment in Rule 89(2)(k) to include refund of interest and other amounts as per the Section 54(8) in case of refund of excess payment of tax.
6. Omission of 1st and 2nd proviso to sub-rule (2) of rule 96 as they do not serve any purpose after the amendments in CGST Act.
7. Amendment in rule 108 and rule 109 of CGST Rules to provide a facility for filing appeal manually in certain specified circumstances.
8. Amendment in FORM GSTR-3A for providing for notice for non-filing of Annual Return in FORM GSTR-9 or FORM GSTR-9A.
4.69 Pr. Commissioner mentioned that the issue was deliberated in detail in Officers meeting, wherein officer from State of Maharashtra suggested that in respect of amendment in rule 108 and 109 of CGST Rules, the words “or due to non-availability of the facility” ma be deleted from the proposed provisos to rule 108(1) and 109(1). The same was agreed by the Officers.
4.70 The Hon’ble Member from Telangana mentioned that after the bifurcation of the State, because of wrong mention of place of supply, tax has been credited to other States. He gave the example of ICICI, in which Maharashtra has been wrongly credited Rs. 80 Crore. Therefore, some mechanism needs to be built to correct it. In 47th GST Council meeting assurance was given to constitute a Committee of officers to resolve the issue and the same may be done. He also suggested that on wrong credit, adjustment should be mad subsequently.
4.71 The Hon’ble Chairperson stated that because there was a decision taken in the 47th council meeting on the concern raised by Telangana, the officer’s committee must table report to the Council in the next meeting, highlighting challenges, possibility or impossibility of the implementation of the issue raised by Telangana.
Decision: The Council agreed with the said recommendation of the Law Committee, along with the amendment suggested in the Officers’ meeting. Moreover, the issue raised by the Member, Telangana regarding wrong credit may be looked into as decided in the 47th GST Council meeting.
Agenda 3 (xviii)-Proposal to provide a special procedure to file appeal against the orders passed in accordance with the Circular No. 182/14/2022-GST, dated 10.11.2022, pursuant to the directions issued by the Hon’ble Supreme Court in the Union of India v/s Filco Trade Centre Pvt. Ltd.
4.72 Pr. Commissioner, OST Policy stated that the agenda is regarding a special procedure to be provided in cases where Tran-1 and Tran 2 claims were filed in pursuance of direction given by Hon’ble Supreme Court during two months’ window of 01.10.2022 to 30.11.2022. The Law Committee recommended to provide a special procedure under Section 148 of CGST Act for filing of appeals manually against the orders passed in accordance with Circular No. 182/14/2022-GST. A draft notification providing the special procedure to be followed by a person desirous of filing an appeal against an order passed by the proper officer in accordance with Circular No. 182/14/2022-GST which was issued pursuant to the directions issued by the Hon’ble Supreme Court in the Union of India v/s Filco Trade Centre Pvt. Ltd., SLP(C) No.32709-32710/2018 has been formulated by the Law Committee and is detailed in the agenda.
Decision: The Council agreed with the said recommendation of the Law Committee.
Agenda 3 (xix)- Issues pertaining to ISD mechanism and taxability of services provided one distinct person to another distinct person.
4.73 Pr. Commissioner, GST Policy stated the agenda concerns the ISD mechanism and taxability of services between distinct persons. This issue was earlier deliberated by the OST Council and was referred back to the Law Committee for further examination.
4.74 He informed that there are two aspects for consideration- regarding the common input services procured from third parties and the internally generated services. The Law Committee proposed to issue a circular to clarify the issue in respect of both of such cases.
4.75 The Law Committee took a view that there is no intent in the present provision of CGST Act to make ISD mechanism mandatory, and accordingly, it may be clarified through a circular that it is not mandatory to follow ISD procedure laid down in Section 20 of CGST Act read with rule 39 of the Central Goods and Services Tax Rules, 2017 for distribution of ITC in respect of input services procured by HO from a third party but attributable to both HO and BO or exclusively to one or more BOs and that such credit can also be passed on by HO by issuing tax invoices under section 31 of CGST Act to the concerned BOs. In cases, here HO wants to distribute credit through ISD mechanism, it shall be required to get itself registered mandatorily as per provisions of section 24(viii) of CGST Act. Further, it may also be clarified that HO can distribute the ITC to a BO through ISD mechanism or can issue voice under section 31 to a BO in respect of an input services received from a third party only if the said services are being supplied to the concerned BO .
4.76 For prospective periods: Law Committee took a view that ISD procedure, as laid own in Section 20 of CGST Act read with rule 39 of the CGST Rules, may be made mandatory prospectively for distribution of ITC in respect of input services procured by Head Office (HO) from a third party but attributable to both HO and Branch Office (BO) or exclusively to one or more BOs. Further, ITC on account of input services received from a third party, where such input services are liable to tax on reverse charge basis, should also be required to be distributed through ISD route. This will require amendment in law which the Law Committee may formulate in due course.
4.77 For internally generated services: Law Committee recommended to clarify through the Circular that in cases where full input tax credit is available to the recipient, the value of such supply of services declared in the invoice by HO to BOs may be deemed as open market value, irrespective of the fact whether cost of any particular component of such services, like employee cost etc., has not been included in the value of the services in the invoice, or not. It may be further clarified that in cases where full input tax credit is available to the recipient if the invoice is not issued with respect to any internally generated services by the HO to the BO, the value of such services may be deemed to be declared as Nil by HO to BO, and may be deemed as open market value in terms of second proviso to rule 28 of CGST Rules.
4.78 Pr. Commissioner, GST Policy also stated that the Law Committee could not make any recommendation for taxability and valuation of internally generated services in cases where full input tax credit is not available to the recipient.
4.79 He mentioned that the issue was deliberated in detail in the Officers’ meeting. The officers agreed with all the recommendations made by the Law Committee. However, in the Officers’ meeting, discussions were also held on the issue of taxability of internally generated services in cases where full input tax credit was not available to the recipient. He mentioned that it was broadly discussed in the Officers’ meeting to clarify in the circular that in respect of internally generated services, the cost of salary of employees involved in providing the said services, may not be required to be mandatorily included while computing the taxable value of the supply of such services, in cases where full input tax credit is not available to the recipient. He sought approval of the Council for incorporation of the suggestion made in Officers’ meeting in the draft circular recommended by the Law Committee.
4.80 The Hon’ble Member from Karnataka suggested that Law Committee may also consider the possibility of allowing taxpayers to apportion costs of supplies according to their discretion without making it overly burdensome. The aim is to facilitate compliance and avoid the need for meticulous breakdown and apportionment of every cost. He also added that there is a need for caution as this is liable for different interpretations and may give rise to disputes.
Decision: The Council agreed with the said recommendation of the Law Committee, along with the suggestion made in the Officers’ meeting regarding taxability of internally generated services in cases where full input tax credit was not available to the recipient.
5. Agenda item 4: Recommendations of the Fitment Committee for the consideration of the GST Council
5.1 The Secretary introduced the agenda item relating to the recommendations of the Fitment Committee. These recommendations had been given in six (06) Annexures, the first three related to Goods and the other three related to Services. The first Annexure listed issues relating to goods where tax rate changes or clarifications were recommended; the second Annexure listed items related to Goods where no tax rate changes were recommended and the third Annexure listed items related to Goods where the issues were deferred by the Fitment Committee for further examination. The fourth Annexure listed the recommendations for making changes in GST rates or for issuing clarifications in relation to Services; the fifth Annexure listed the services where no tax rate changes were being recommended and the sixth Annexure where the issues were deferred by the Fitment Committee for further examination in relation to services.
5.2 The Secretary then asked the Joint Secretary, TRU, DoR to take the Council through the brief presentation on the recommendations of the Fitment Committee.
5.3 JS, TRU stated that a total of 35 issues in respect of goods were examined. Out of these, on 14 issues, recommendations were made for tax rate changes or issuance of clarifications, on 17 issues no tax rate change or status-quo was recommended and on 4 issues, the Fitment Committee has recommended deferring the issues for further examination. She further stated that a total of 16 issues in respect of services were examined, out of which, on 7 issues recommendations were made for tax rate changes or clarifications, on 3 issues, no tax rate changes or status-quo was recommended and on 6 issues the Fitment Committee had recommended deferring the issues for further examination. The presentation made by JS, TRU is attached as Annexure-4.
5.4 JS, TRU started with the agenda items pertaining to goods where change in rates or issuance of clarification (14 issues) had been recommended by the Fitment Committee (Annexure-1).
5.5 The first issue pertained to tax rate change on uncooked/unfried snack pellets manufactured through extrusion process where the Fitment Committee recommended to reduce GST to 5% on uncooked/unfried extruded products by whatever name called. Fitment Committee also recommended to regularize for past period on ‘as is where is’ basis due to genuine doubts. She further informed that the said issue was also discussed in detail in the Officer’s Meeting on 10.07.2023 and no objections were raised.
Decision: The Council agreed with the recommendation of the Fitment Committee to reduce the tax rate on uncooked/unfried snack pellets manufactured through extrusion process by whatever name called from 18% to 5% and regularize the issue for the past period on ‘as is where is’ basis.
5.6 The Hon’ble Member from Delhi thanked the Council for the decision.
5.7 JS, TRU then presented the second issue pertaining to Fish Soluble Paste where Fitment Committee recommended that since the final product fish meal attracts 5%, there appears to be merit in the argument that by waste generated as a by-product during the process of manufacture of fishmeal should not attract 18% and recommended to reduce GST rate on Fish Soluble Paste (2309) to 5%. Fitment Committee also recommended to regularize the matter for the past period on “as is basis” in view of genuine interpretational issues.
5.8 The Hon’ble Member from Goa thanked the Council for reducing the tax rate on Fish Soluble Paste. He further cited the judgment of Hon’ble High Court of Madras in the case of Jenefa India vs GOI and informed that only the taxpayers of State of Tamil Nadu are getting benefit of exemption on Fish meal while the taxpayers of rest of the States are paying 18%. He added that the exchequer is incurring substantial loss of revenue because of this anomaly and requested GST Council to ensure a uniform levy. He also requested that the practice in the State of Karnataka may also be rechecked in this regard.
5.9 The Hon’ble Member from Tamil Nadu stated that if there is something by which exchequer is incurring loss of revenue then the State of Tamil Nadu will collect all the information about it and definitely act accordingly.
5.10 It was informed by JS, TRU that an appeal has been preferred against the said judgement. Hon ‘ble Member from Chattisgarh enquired whether a stay has been obtained and if not, then whether the option of exemption was still being exercised.
5.11 The Hon’ble Chairperson sought a report on the entire issue within a week’s time.
5.12 The Hon ‘ble Member from Goa thanked the Council for considering this issue.
Decision: The Council agreed with the recommendation of the Fitment Committee to reduce the tax rate on Fish Soluble Paste from 18% to 5% and regularize the issue for the past period on ‘as is where is‘ basis.
5.13 JS, TRU then presented the third issue pertaining to IGST exemption on the cancer medicine Dinutuximab (Quarziba) used for treatment of Neuroblastoma when imported for personal use. She stated that during the officers’ meeting on 10.07.2023, one of the suggestions was to check from the Ministry of Health and Family Welfare whether the said medicine is manufactured in India and that it has been informed by the Ministry of Health and Family Welfare that it is not approved for manufacture in India and the country’s needs are met by import.
Decision: The Council agreed with the recommendation of the Fitment Committee to exempt IGST on Dinutuximab (Quarziba) when imported for personal use.
5.14 JS, TRU then presented the fourth issue pertaining to medicines and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases and informed that the Fitment Committee recommended to exempt IGST on such medicines used in the treatment of rare diseases enlisted under the National Policy for Rare Diseases (NPRD), 2021 which are imported for personal use subject to the existing conditions and when imported by Centre of Excellence or any person or institution on recommendation of any of the listed Centre of Excellence. She also informed the Council that post Budget 2023-24, Basic Customs Duty (BCD) exemption has been given to drugs and Food for Special Medical Purposes (FSMP) when ‘imported for personal use for treatment of rare diseases enlisted in the National Policy for Rare Diseases, 2021 . The BCD exemption currently available for drugs used in treatment of rare diseases imported by Centres of Excellence for Rare Diseases or any person or institution on recommendation of any of the listed Centre of Excellence was also expanded to include Food for Special Medical Purposes (FSMP)
Decision: The Council agreed with the recommendation of the Fitment Committee to exempt the IGST on medicines and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases enlisted under the National Policy for Rare Diseases (NPRD),2021 which are imported for personal use subject to existing conditions and when imported by Centres of Excellence or any person or institution on recommendation of any of the listed Centre of Excellence.
5.15 JS, TRU then presented the fifth agenda pertaining to issuance of clarification about GST rate on Trauma, Spine and Arthroplasty implants falling under heading 9021, for the period prior to the 18.07.2022. She informed that earlier there were two entries @ 5% and 12% for similar goods under 9021, which was causing confusion. On the recommendations of 47th meeting of the GST Council, a GST rate of 5% was fixed on all goods falling under heading 9021 w.e.f. 18.07.2022.
5.16 Fitment Committee recommended to regularize the matter for the period prior to 18.07.2022 on “as is basis” provided tax had been paid @5% or 12% in view of genuine interpretational issues.
Decision: The Council agreed with the recommendation of the Fitment Committee w.r.t. rate on Trauma, Spine and Arthroplasty implants.
5.17 JS, TR U presented the sixth issue pertaining to request for clarification on raw cotton supplied by agriculturists to cooperatives. Fitment Committee recommended to clarify that supply of raw cotton, including kala cotton, from agriculturists to cooperatives is a taxable supply and attracts 5% GST under reverse charge mechanism since cooperatives are registered persons, and also recommended to regularize for the past periods on “as is basis” in view of genuine doubts regarding taxability. She also informed the Council that in the officers’ meeting no objections were raised on the recommendations of the Fitment Committee on this issue.
Decision: The Council agreed with the recommendations of the Fitment Committee w.r.t. raw cotton.
5.18 JS, TRU then presented the seventh issue pertaining to consequential changes after the new Foreign Trade Policy coming into force. She stated that the Foreign Trade Policy 2023 came into force with effect from 1st April, 2023 and that the changes mostly involved updating the references of relevant paragraphs in various Customs and JOST notifications. Fitment Committee recommended for consequential changes to be carried out in notifications which would be mostly technical in nature.
Decision: The Council agreed with the recommendation of the Fitment Committee w.r.t changes in view of the new FTP.
5.19 JS, TRU then presented the eighth issue pertaining to the issue clarification of applicable GST rate – on imitation zari thread to avoid ambiguity prevailing on the applicable rate of GST on such goods. Fitment Committee recommended to reduce GST rate to 5% on imitation zari thread or yarn known by any name in trade parlance and further recommended that the issue may regularized for the past period on “as is where is” basis.
Decision: The Council agreed with the recommendation of the Fitment Committee w.r.t. imitation zari thread or yarn known by any name in trade parlance.
5.20 JS, TRU then presented the ninth issue pertaining to LD Slag where Fitment Committee recommended to reduce the tax rate from 18% to 5% considering that consumption of LD slag needs to be encouraged for better utilization of this waste and protection of environment and to bring parity with Blast Furnace Slag (BFS) and Fly Ash. JS, TRU stated that LD slag is a by- product of steel industry. She further informed that in the Officers meeting, officers from Orissa and Punjab had pointed out that the issue had also been discussed in 48th meeting of the GST Council wherein the recommendation for reduction of rate was not agreed to since ITC would be available to cement manufacturers. It was explained that LD slag is not preferred by the cement industry due to excess lime content and for uptake in cement industry they have to do further processing. Karnataka had also clarified that other by products of steel already attract 5% and therefore on grounds of parity the rate might be considered for reduction. On other by products too the rate was reduced on grounds of environmental concerns.
5.21 Hon’ble Member from Maharashtra pointed out that if there is no offtake, the issue of taxing at 18% has no meaning.
5.22 The Hon’ble Member from Orissa stated that the pre-GST incidence of tax on LD slag was 17.5% (12.5% central excise and 5% VAT). Present rate of 18% in line with pre GST tax incidence. He stated that the Fitment Committee had recommended status quo earlier which is in line with the decision taken by the Council to tax essential commodities at 5% and that other for other items the tax rate should be kept at 18%, and therefore this recommendation of the Fitment Committee is at variance with that adopted in 45th GSTCM. The Hon’ble Member from Odisha requested that the issue be referred back to the Fitment Committee and Odisha may be invited to give its views on the same.
5.23 The Hon’ble Member from Delhi enquired about the quantum of LD slag produced in the country versus the offtake, because the decision would be taken on that basis.
5.24 JS TRU stated that for 10 MT of steel production, 1.8 MT LD slag is produced, and since the National Steel Policy envisages 300 million tonnes of steel production by 2030, India will produce 99 million tonnes of BF slag and 54 MT of LD slag, that while steel industry will consume significant amount of BF slag, there would be few takers for LD slag at high GST rate, and dumping of LD slag will result in environmental hazard. She stated that the offtake is now 25%.
5.25 The Hon’ble Member from Karnataka stated that dis-incentivizing the usage of LD slag by keeping the GST rate at 18% would not be in the interest of the environment. He stated that if cement manufacturers use LD slag, whether the tax rate was 5% or 18%, benefit of ITC would be available to them and hence there would be no loss to the exchequer. Now, since the rate is at 18%, the road making industry is dis-incentivized from using LD slag. By lowering the rate to 5% if we can encourage some end usage of this product, it would be in the larger social and environmental interest.
5.26 The Hon’ble Member from Kerala stated that while there is a revenue angle, for example Odisha was producing LD slag and therefore their revenues might be affected, the environmental angle was equally an issue. So if the usage was in the cement industry, it might be okay but while promoting usage of LD slag in roads, environmental issue needs to be kept in mind. He further stated that in Kerala LD slag was not being used in construction of roads as they do not have steel industry but considering the fact that l00 MT of LD slag was going to be produced in the future, whether it will create some other environmental issue if used in roads needs to be kept in mind.
5.27 The Hon’ble Chairperson stated that argument was to reduce the rate to incentivize the use of LD slag which would result in collateral benefits of be reducing the harmful effects of dumping this waste product.
5.28 The Hon’ble Member from Telangana stated that they were able to use 100% of fly ash produced in their State for bricks and for use in highway construction and no hazards were reported.
5.29 The Hon’ble Member from UP agreed to the levy of 5% GST on LD slag. Based on discussions, Hon’ble Member from Odisha also agreed to the levy of 5% GST on LD slag.
Decision: The Council agreed with the recommendation of the Fitmeot Committee w.r.t. LD slag.
5.30 JS, TRU presented the tenth issue pertaining to amend the exemption notification No. 50/2017- Customs dated 30.06.2017. Fitment Committee recommended to update list 34 in Notification 50/2017- Customs so as to include RBL Bank and ICBC Bank and update list 34 as per the updated Appendix 4B of FTP-2023 subject to confirmation from DGEP and DGFT.
Decision: The Council agreed with the recommendation of the Fitment Committee to include RBL Bank and ICBC Bank.
5.31 JS, TRU presented the eleventh issue pertaining to applicability of compensation cess on utility vehicles such as MUV/XUV /MPV with length more than 4000 mm, engine capacity more than 1500 cc and ground clearance of 170 mm and above. She stated that during the discussion in the 48th meeting of GST Council held in December, 2022 on agenda item relating to issuance of clarification on compensation cess leviable on SUVs, Hon’ble Member from Haryana had suggested that compensation cess on other utility vehicles such as MUV might also be deliberated upon. The Council directed the Fitment Committee to examine the same. She stated that earlier, based on the recommendation of the 21st GST Council, a higher rate of compensation cess of 22% was notified on “Sports Utility Vehicles (SUVs) (of length more than 4-metre, engine capacity more than 1500 cc and ground clearance 170 mm)”. Fitment Committee has now recommended to amend the entry to include all utility vehicles by whatever name called provided they met the parameters of length greater than 4000 mm, engine capacity more than 1500 cc and ground clearance of 170 mm& above and further recommended to insert an explanation to clarify for the purposes of the said notification entry that “Ground Clearance” in entry 52B means Ground Clearance in un-laden condition.
5.32 Secretary, Haryana stated that around 40% of the SUVs are still falling under the 20% Cess slab and due to laden height condition, 2% Cess is being lost which amounts to a great loss of the revenue. He further added that there is a difference in the way the ground clearance is being calculated as per BIS standard and Fitment Committee recommendation and suggested to fix the cess at 22% for all SUVs.
5.33 JS, TRU informed that the State of Haryana had raised the issue in the meeting of the Fitment Committee. She stated that the suggestion to merge the entries 52A and 52B of Notification No. l/2017-Compensation Cess (rate) into one category to make Compensation Cess rate uniform at 22% would be taken up in the next Fitment Committee. She stated that this particular clarification as recommended by the Fitment Committee would cover some models of vehicles. More data is required to analyze the revenue impact of merging 20% and 22% cess slabs, as suggested by the State of Haryana.
5.34 The Hon’ble Chairperson requested Haryana to provide additional data to the Fitment Committee and for now the recommendation of the Fitment Committee may be accepted. Decision: The Council agreed with the recommendation of the Fitment Committee and accordingly agreed to amend the entry 52B in the compensation cess notification to include all utility vehicles by whatever name called provided they meet the parameters of length exceeding 4000 mm, engine capacity exceeding 1500 cc and having ground clearance of 170 mm & above and to clarify by way of inserting an explanation that ‘ground clearance’ means ground clearance in unladen condition.
5.35 JS, TRU then presented the twelfth issue pertaining to Compensation Cess rate on Pan Masala chewing tobacco etc. JS, TRU informed that the levy of compensation cess on these products was converted from ad valorem tax to specific tax based levy linked to retail sale price (RSP) on such products to implement the recommendations made by the GST Council in its 49th meeting. She stated that they have been receiving representations about the challenges in determining the rate of compensation cess in cases where it is not legally required to declare the RSP. The Fitment Committee has therefore recommended to notify that the earlier ad valorem rate as was applicable on 31st March, 2023 for such goods by amending the said Notification in cases where it is not legally required to declare RSP.
5.36 The Hon’ble Chairperson asked Hon’ble Member from Uttar Pradesh if he is in agreement with the recommendations of the Fitment Committee as the particular issue was raised by State of Uttar Pradesh.
5.37 The Hon’ble Member from Uttar Pradesh stated in the affirmative.
5.38 The Hon’ble Member from Karnataka inquired about the value difference between the calculation of ad-valorem rate and a weighted average of the RSP.
5.39 JS, TRU informed that there is no difference in the rate as the ad valorem rates were converted to specific rates based the recommendations of the GoM.
5.40 Hon’ble Member from Karnataka expressed his apprehension that if there was a significant rate difference, it might create an arbitrage and provide an incentive to move from RSP based levy to an ad valorem rate.
5.41 The Secretary mentioned that there may be a difference and that is why in order to plug revenue leakages, the GoM had recommended the levy of cess on pan masala, chewing tobacco etc. be based on RSP instead of the earlier ad valorem based levy. He stated that there was a possibility that the whole value chain may not be captured for revenue purposes if we revert to the earlier system, but where there is no legal requirement to have a RSP, there is no other option other than go for ad valorem rate.
5.42 He stated that the concerns raised by Hon’ble Member from Karnataka could only be addressed by enforcement measures. The Hon’ble Member from Karnataka suggested that the ad-valorem levy could be made equal to the weighted RSP to prevent arbitrage.
Decision: The Council agreed with the above recommendation of the Fitment Committee w.r.t. compensation cess rate on tobacco products.
5.43 JS, TRU presented the thirteenth issue pertaining to desiccated coconut for the period 01.07.2017 to 27.07.2017. She stated that prior to 27.07.17 there was no specific entry for Desiccated Coconut and the taxpayers assumed that it was exempt. Representations had been received requesting to regularize the intervening period between issue of original notification and issue of corrigendum to notification 1/2017-CT(R) dated 27.7.2017 prescribing 12% GST rate. Fitment Committee recommended to regularize the period 01.07.2017 to 27.07.2017 on “as is where is” basis on account of genuine interpretational issues.
Decision: The Council agreed with the recommendation of the Fitment Committee w.r.t. desiccated coconut.
5.44 JS, TRU presented the fourteenth issue pertaining to Areca Leaf plates and cups. She stated cups and plates made of areca leaf are already exempt. Fitment Committee had examined it and suggested that no action is required on the representation received but during the officers’ meeting it was clarified that the request was not for exemption but for regularizing the period prior to the exemption i.e. prior to 1.10.2019, on “as is basis” and the same was discussed in the officers’ meeting and therefore, recommended for its regularization.
Decision: The Council agreed with the recommendation w.r.t. areca leaf plates and cups.
5.45 JS, TRU then presented the agenda pertaining to goods (17 issues) where no changes or status quo had been recommended by the Fitment Committee (Annexure-II).
5.46 She presented the first issue i.e, reduction of GST rate on Agro-based biomass pellets from 5% to Nil. She informed that Ministry of Power has requested for reduction of GST rate to Nil on solid bio-fuel pellets / Biomass briquettes or pellets on the basis that they have a mandate to use 5% for coal firing and also promote its uptake. She further stated that Fitment Committee had recommended status quo which was placed before the GST Council in 37th and 47th GST Council Meeting, and the GST Council did not recommend further reduction in rate to Nil. She said that Gujarat had suggested regularizing the issue relating to GST on biomass briquettes for the period from 1.7.2017 to 12.10.2017.
5.47 The Hon’ble Member from Punjab suggested that GST rate on Agro based biomass pellets may be reduced to Nil keeping in mind the environment issues as pollution is a huge problem in north India and many NGOs and Courts are also involved.
5.48 The Secretary noted that only Punjab appeared to be in favour of reducing the rate to Nil.
5.49 The Hon’ble Member from Uttar Pradesh informed that this issue is already discussed in earlier GST Council Meeting and Fitment Committee has also not recommended the same.
5.50 The Secretary informed that this product goes into the exempt sector that is production of electricity and therefore, exempting this would mean a loss of revenue to the government.
5.51 The Hon’ble Member from Delhi inquired about the quantum involved.
5.52 JS, TRU informed that as per Ministry of Power, demand of Agro-based biomass pellets has increased upto l lakh MT per day. However, the present capacity is 7000 to 8000 MT, so the request is to increase its uptake. She further informed that since this product is primarily used in the electricity sector, it will amount to zero rating supply which is usually for export.
5.53 The Hon’ble Member of Delhi said that issue is similar to the LD slag issue and it is an environmental issue and suggested reducing the tax rate from 5% to Nil to increase the off take.
5.54 JS, TRU informed that there is a difference between LD slag and Agro-based biomass pellets where the first one is part of the GST chain while the latter one becomes a zero rated supply and goes out of the GST chain.
5.55 The Hon’ble Chairperson appreciated the point about environmental concerns but stated that zero rating is meant for exports as taxes are not exported. She stated that rate for LD slag was not being brought to zero and the recommendation was to tax it at 5%. Here also the tax rate suggested is 5%.
5.56 The Hon’ble Member from Punjab requested that issue may be referred back the issue to Fitment Committee.
5.57 The Hon’ble Chairperson appreciated the view of Member from Delhi and reiterated that zero rating supply is for exports. She informed that Fitment Committee suggested for 5% GST Rate for LD s lag not Zero. Here too environment concerns a taken into account and the tax rate is being recommended to be fixed at 5%.
5.58 The Hon’ble Member from Uttar Pradesh stated that there has been no change in circumstances since the decision of the GST Council and therefore, the issue should not have been reopened.
5.59 JS TRU explained that based on VIP references/Ministry reference issues get reopened.
5.60 The Secretary suggested that an issue which is approved in the recent past should not be brought back to the Council until there are new facts or changed circumstances. He sought permission of the Chair and the approval of the Council to reply to such references about the decision taken and not bring the issue over and over again before the Council unless the material change in circumstances is brought on record. Chairperson agreed to the same.
Decision: The Council agreed with the recommendation of the Fitment Committee to maintain status quo on the rate and regularize the issue relating to biomass briquettes for the period 1.7.2017 to 12.10.2017 on “as is basis”.
5.61 JS, TRU then presented the second issue regarding request for increase in GST rate of De-Oiled Rice Bran from Nil to 5%. She informed that recommendation had been received from the Department of Food and Public Distribution to impose 5% GST Rate on DORB. She informed that prior to the 25th Council Meeting Rice Bran (HS 2302) for use as feed was at Nil and for other uses was at 5%. The GST Council in its 25th Meeting held on l 8.01.2018, decided to levy 5% GST on Rice Bran, irrespective of end use, and Nil GST on De-Oiled Rice Bran. This was notified w.e.f. 25.01.2018. The interim report of GoM on rate rationalization also did not recommend bringing all goods under chapter 23 to 5% GST Rate and hence Fitment Committee recommended for status-quo.
Decision: The Council agreed with the recommendation of the Fitment Committee to maintain status quo w.r.t. De-Oiled Rice Bran.
5.62 JS, TRU then presented the third issue pertaining to products falling under any chapter, prepared or manufactured by the inmates of Kerala Prison and Correctional Services Department. She informed that recommendation was received for Nil GST Rate. Fitment Committee recommended for status-quo.
5.63 The Hon’ble Member from Andhra Pradesh suggested that Council needs to look at the issue from different perspective and at such correctional facilities instead of hard labour now train ing on vocational skills is being imparted. Mostly three kinds of products are being supplied: cloth, bakery products and furniture/steel products and the amount in question is also very little. He· stated that the request has been turned down on the apprehension that there might be revenue leakages. He requested that the exemption might be considered that the sale happens only through a few central prisons, each State having 4-5 such prisons. He requested to exclude such products from GST bearing in mind that these products need to be competitive in the market and that the inmates need to be imparted some skill so as to enable them to eke out their livelihood after leaving prison and keep themselves occupied while serving their time in jail.
5.64 State of Kerala supported the view of Andhra Pradesh.
5.65 The Hon’ble Member from Maharashtra was of the view that there were other ways to support such goods such as making mandatory procurement of such goods by Government departments and did not support tax concession.
Decision: The Council agreed with the recommendation of the Fitment Committee to maintain status quo w.r.t. proposal pertaining to Kerala Prison and correctional Services Department.
5.66 JS, TRU stated that the next issue pertained to bio-fertilizers and other such organic inputs and the issue of rate reduction on the same had already been examined in the 31st 39th 45th and 47th Council meetings but the Council did not recommend any change in the rates of bio-fertilizers and other such organic inputs. The Fitment Committee recommended maintaining status quo. The Secretary then requested for the comments of the Hon’ble Members of the Council on the recommendations put forth by the Fitment Committee on the. issues pertaining to GST rate reduction on Sungudi Saree; upfront exemption from payment of IGST and refund mechanism to be done away with for IAEA; GST rate reduction for Av gas; machinery used in Sericulture Industry and automatic reeling machinery; all Sports goods & fitness products and Mega Power Projects. All agreed to the same.
Decision: The Council agreed with the recommendations of the Fitment Committee to maintain status quo w.r.t. agenda as detailed in para 5.65 above.
5.67 The Secretary then requested for the comments of the Hon’ble Members of the Council on the recommendations put forth by the Fitment Committee on the issues of Apple Carton Boxes. The Hon’ble Member from Himachal Pradesh requested that corrugated boxes of specified dimensions can be put in the lower tax bracket. He informed that 90% of the apple carton boxes used in the State of Himachal Pradesh have capacity from 10 Kg to 20 Kg which have specific dimensions different from the industrial packages and requested to reconsider the issue as the growers are being affected in small horticulture States like Himachal Pradesh and reduce the GST rate from 18% to 12%. He informed that in the last Council meeting, Maharashtra had come out in support of the issue.
5.68 Jammu and Kashmir informed that mostly corrugated boxes are being used in Jammu and Kashmir which was earlier taxed at 12% but for the sake of uniformity the tax rate was increased to 18%. He requested to reduce the GST rate on corrugated boxes to 12%.
5.69 The Secretary noted that this item had been deliberated earlier multiple times and had come up for discussion in the last meeting and stated that this will be difficult to administer as the same boxes could be put to multiple uses. The Hon’ble Member from Maharashtra stated that the boxes were going to be used for various items and therefore, if tax rate is to be reduced, the reduction has to be given irrespective of end use. Therefore, it is not feasible to reduce the tax rate in this case.
5.70 Hon’ble Member from Gujarat stated that industrial products could also be packed in such boxes.
5.71 Hon’ble Member from Himachal Pradesh requested to reduce the GST rate on carton boxes from 18% to 12%.
5.72 The Hon’ble Member from Uttar Pradesh suggested to maintain the status quo on this issue.
5.73 Considering the aspect of usage of such boxes in agro-industry, the Hon’ble Chairperson referred it back to the Fitment Committee for re-examination after obtaining the views of the States of Jammu Kashmir and Himachal Pradesh.
Decision: The Council referred back the issue of GST on carton boxes to the Fitment Committee for re-examination.
5.74 The Secretary then presented the issue of GST rate and compensation cess rate reduction for two wheelers and four wheeler Flexi Fuel Vehicles and sought the comments of the Hon’ble Members of the Council, if any.
Decision: The Council agreed with the recommendations of the Fitment Committee w.r.t. flexi fuel vehicles to maintain status quo.
5.75 The Secretary then presented the issues pertaining to GST rate reduction in agricultural products; utensils made of brass; Heavy feedstock, Vacuum Gas Oil, reformates, etc.; all bakery products manufactured and sold by MSME and sought the comments of the Hon’ble Members of the Council, if any.
Decision: The Council agreed with the recommendations of the Fitment Committee w.r.t. agenda as detailed in para 5.74 above to maintain status quo.
5.76 The Secretary then presented the agenda pertaining to the goods (4 issues) where fitment has deferred the issues for further examination (Annexure-III).
5.77 On the issue of Millet based products, the Hon’ble Member from Delhi suggested that the decision on the Millet based products may be taken at an early date as this is the International year of Millets as declared by the Government of India and secondly, increasingly it is part of nutrition supplied by most of the Anganwadis and thirdly, it is a very healthy food option.
5.78 The Secretary assured that a decision on this would be taken as early as possible.
5.79 The Hon’ble Member from Karnataka supported the view of Delhi and informed that lifestyle diseases are on the rise due to imbalanced diets and millets are a healthier alternative also they use little water and consume very litt le chemical fertilizers so their environmental footprint is very minimal too. Millets are climate resilient crops and highly nutritious as they are naturally fortified. He requested for a positive and early decision on this as this was the International Year of Millets and Government of India has already taken other decisions to promote the use of millets.
5.80 The Secretary directed the Fitment Committee to come up with their recommendations expeditiously.
5.81 The Hon’ble Member from Uttar Pradesh stated that the tax rate related to steel scrap and Millet based products needs to be decided on an urgent basis. JS, TRU informed the Council that a sub-committee has been constituted by the Fitment Committee to deliberate upon the issue pertaining to steel scrap. JS, TRU further informed that the agenda related to steel scrap and millet based products would be taken up in the upcoming Council meeting. The Secretary informed that the issue pertaining to steel scrap and millets would be taken up and brought before the Council in the upcoming meeting.
5.82 JS, TRU introduced the next Agenda item 4(d) where recommendations were made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to services (Annexure IV). She stated that the first issue was related to exempting GST on satellite launch services provided by private organizations and that satellite launch services by ISRO, Antrix Corporation Ltd. and New Space India Limited are already exempt from GST. The Fitment Committee recommended that exemption may be extended to satellite launch services provided by private organizations with a view to provide level playing field and encourage start-ups.
Decision: The Council agreed with the recommendations of the Fitment Committee to exempt GST on satellite launch services provided by private organizations.
5.83 Joint Secretary, TRU informed that the second issue listed at Sr. No. 2 of Annexure IV related to rectification in item at SI. No. 3(ie) of notification No. 11/2017-CTR which continued to have reference to some of the housing schemes etc. figuring under erstwhile sl. No. 3(iv), (v) and (vi) of the said notification in order to take care of the real estate projects which commenced prior to 01.04.2019. The items at sl. No. 3(iv), (v) and (vi ) of the above notification were omitted vide notification No. 03/2022-CTR dated 13.07.2022. The Fitment Committee recommended that the anomaly be rectified by inserting suitable explanation to effect that the item at sl. No. 3(ie) of the said notification refers to sub-items of the item (iv),(v) and (vi) of the notification as they existed in notification prior to their omission vide notification No. 03/2022-CTR dated 13.07.2022.
Decision: The Council agreed with the recommendations of the Fitment Committee w.r.t. insertion of an explanation at SI. No. 3(ie) of notification No. 11/2017-CTR
5.84 The Secretary informed the Council that the third issue listed at Sr. No. 3 of Annexure IV related to omission of clause (h) of explanation to the entry at SI. No. 24 (i) of the notification No. 11 /2017 CTR. On the recommendation of GST Council in its 47th meeting, exemption entry at sl. No. 53A of the notification No. 12/2017 CTR dated 28.06.2017 which covered “‘services by way of fumigation in a warehouse of agricultural produce” was omitted vide notification No. 04/2022-CTR dated I 3.07.2022. However, a parallel entry at clause (h) of explanation to the entry at SI. No. 24 (i) of the notification No. 11/2017 CTR dated 28.06.2017 for the same service had not been omitted. Fitment Committee recommended that the same may be omitted.
Decision: The Council agreed with the recommendations of the Fitment Committee w.r.t. omission of an entry at clause (h) of explanation to the entry at SI. No. 24 (i) of the notification No. 11/2017 CTR dated 28.06.2017.
5.85 The Secretary informed the Council that agenda Item listed at Sr. No. (4)(a) of Annexure IV related to exercise of option by Goods Transport Agencies (GT As) to pay GST under Forward Charge Mechanism (FCM). Fitment Committee recommended that the requirement to exercise option to pay GST under forward charge every year may be done away with and it may be provided in the notification that GT As who have exercised option to be under FCM during a particular Financial Year shat I be deemed to have exercised it for the next and future Financial Years unless they file a declaration that they want to revert to Reverse Charge Mechanism (RCM).
5.86 The Secretary further informed the Council that for agenda [tern listed at Sr. No. (4)(b) of Annexure IV, GSTN has requested that a start date for filing of option by GTA may be provided for subsequent Financial Years; otherwise the default date for exercise of option for a Financial Year shall be 1st April of the preceding Financial Year. Having start date for exercise of option for a Financial Year as 1st April of the preceding Financial Year is not desirable as this may give rise to false impression to the GT As that they have exercised option for the current financial year. Fitment Committee recommended that the start date may be prescribed as 1st January of the preceding Financial Year. Fitment Committee also recommended that the last date for filing the option may be changed from 15th March to 31st March of preceding Financial Year.
5.87 JS, TRU stated that agenda Item listed at Sr. No. (5) of Annexure IV related to amendment to be made to notification No. 8/2017-ITR and notification No. 10/2017-ITR to remove redundant provisions pursuant to amendments in Finance Act, 2023 subsequent to Hon’ble Supreme Court judgement in Mohit Minerals case in 2022. Fitment Committee recommended that the provisions which were introduced to provide level playing field to Indian Shipping Lines have lost relevance and thus needs to be amended/deleted. The proposed amendments/deletions shall be synchronized with Section 162 of Finance Act, 2023 which is to come into effect from a date to be notified.
5.88 JS TRU stated that agenda Item listed at (6) of Annexure IV pertained to clarification for the services supplied by a director of a company/body corporate to the company/body corporate in his private or personal capacity. Fitment Committee recommended to clarify by way of the circular that the services supplied by a director of a company or body corporate in private or personal capacity such as services by way of renting of immovable property to the said company or body corporate are not taxable under Reverse Charge Mechanism (RCM) under notification No. 13/2017-CTR (SI. No. 6) dated 28.06.2017. The said entry covers only those services supplied by a director of company or body corporate, which are supplied by him as or in the capacity of director of that company or body corporate and shall be taxable under RCM in the hands of the company or body corporate.
Decision: The Council agreed with the recommendations of the Fitment Committee as detailed in agenda items listed at Sr. No. (4)(a), (4)(b), (5) and (6) of Annexure IV.
5.89 The Secretary stated that the last issue listed at Sr. No. 7 of Annexure IV pertains to issuance of clarification that supply of food and beverages in cinema halls is taxable as restaurant service and leviable to GST at 5%. Fitment Committee recommended that a clarification may be issued by way of a circular that food or beverages served in a cinema hall is taxable as restaurant service as long as (a) they are supplied by way of or as part of a service and (b) supplied independently of the cinema exhibition service. Where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply.
Decision: The Council agreed with the recommendations of the Fitment Committee for issuance of clarification with respect to supply of food and beverages in cinema halls.
5.90 The Secretary informed the Council that on 3 issues, no changes have been proposed by the Fitment Committee in relation to services (Annexure V): IGST exemption on purchase of aircraft and aircraft lease payment, GST exemption on services by the way of granting affiliation to schools by Central Board of Secondary Education (CBSE) for conduct of secondary stage examinations in schools and on digital news subscription.
Decision: The Council agreed with the recommendations of the Fitment Committee as detailed in Annexure-V of agenda.
5.91 The Secretary informed the Council that the Fitment Committee deferred following 6 issues (Annexure VI) related to clarification on
i. whether the service by way of hostel accommodation, service apartments/ hotels booked for longer period were service of renting of residential dwelling for use as residence and exempted as per entry number 12 of the notification no. 12/2017-CT(R) dated 28.06.2017
ii. exemption from GST to services provided by District Mineral Foundations,
iii. whether reimbursement of electricity charges received by the Real estate companies, malls, airport operators etc. from their lessees/occupants were exempt from GST,
iv. whether ITC of other business verticals could be used to discharge GST on outward liability in respect of restaurant service,
v. whether job work activity towards processing of “Barley” into “Malted Barley” attracts GST@ 5% and in case it was held that GST @18% is leviable, to regularize for past on ‘as is basis’, and
vi. whether uniform GST rate of 5% was to be applied on Business Correspondent services provided in both rural/urban areas.
5.92 The Secretary called upon the Fitment Committee to bring the deferred agenda items to the Council for a decision in the next meeting.
5.93 The Secretary then introduced the agenda item on positive list of services to be specified in SI. No. 3/3A of Notification No. 12/2017-CT (R) dated 28.06.2017 which was deferred in the 48th Council Meeting held on 17.1 2.2022. The Secretary informed the Council that the agenda item was deliberated in the office.rs meeting and it was suggested by one of the States that this agenda item should be taken up. Officers from the States of Punjab and Bihar had requested to defer this agenda item. The Secretary stated that the Council could take a call on whether to discuss or defer the agenda item. He further stated that there exists an ambiguity around the phrase ‘in relation to’ and one of the suggestions received was to delete this phrase from the entries in notification no. 12/2017 related to pure services and Composite supplies provided to Central Government, State Government or Local Authority. The Hon’ble Chairperson opened the floor for discussion in case the States wished to deliberate upon the agenda or the States might put forth their views during the Fitment Committee meetings in case of deferment.
5.94 The Hon’ble Member from Delhi expressed her desire to discuss the agenda and the issues emanating from it as Delhi had some concerns regarding the same. The Hon’ble member from Karnataka seconded it and stated that the proposition to remove the phrase “in relation to” put forth by the Secretary to the Council might be deliberated upon to see if any consensus could be built on striking out the phrase “in relation to” from Entry Nos 3 and 3A and the agenda item passed in the meeting itself in case there were no other issues.
5.95 The Hon’ble member from Karnataka stated that in cities like Bangalore and Delhi, there were specialized agencies which delivered municipal services. Therefore, services like garbage collection, water supply, etc. attract GST @ 18% which was not in public interest at all. Therefore, if the Council agreed to remove the phrase ” in relation to” from Entry No. 3 and 3A that would resolve the issue for the State of Karnataka. Any other issue, if pointed out by any other State may be deliberated upon in Fitment Committee meetings post deferment of the agenda item.
5.96 The Hon’ble Chairperson sought the opinion of other Hon’ble Members on the suggestion of Hon’ble Member from Karnataka. In case, the issue related to removal of phrase “in relation to” was the only issue and consensus was built in the Council, the Council might agree to pass the agenda by incorporating the decision of the Council. In case of any substantial issues, the agenda item might be deferred.
5.97 The Hon’ble Chairperson sought comments from Hon’ble Members of the Council whether they agreed to the proposition of Hon’ble Member from Karnataka. The Hon’ble Member from Tamil Nadu concurred with the views of Hon’ble Member from Karnataka suggesting for removal of the phrase “in relation to” from the relevant entry. However, he objected to the actions of pruning of the list for which tax exemption was available by giving a positive list. He cited that it leads to extra financial burden for local bodies and State Government. Further, the Hon’ble Member from Punjab sought some more time to study the list comprehensively and once again requested the Chair to defer the agenda item to be taken up in the next Council Meeting.
5.98 Considering the views of the States of Punjab and Bihar, the Chairperson proposed to defer the agenda item. The Secretary stated that it would be brought before the Council for a decision in the next meeting of the Council.
Decision: The Council agreed to defer the agenda item.
6. Agenda Item 5: Second Report of the Group of Ministers (GoM) on Casinos, Race Courses and Online Gaming
6.1 Joint Secretary, TRU presented a Factsheet on Horseracing, Online Gaming and Casino which has been annexed as Annexure-5. The Factsheet encapsulates the factual status, revenue, legal position, present practice and the issues for information and decision of the GST Council.
6.2 Sh. Conrad Sangma, the Honorable Chief Minister from Meghalaya and the Convener of the Group of Ministers (GoM) on Casinos, Race Courses and Online Gaming, apprised the Council that two reports had been submitted so far. However, in the second and final report the views remained inconclusive due to complexity of issue and the different views expressed by the participating States and hence stated that the GoM has recommended Council to take the decision.
6.3 In his address, he provided a contextual background of both reports and threw light on the initial understand ing of actionable claim except lottery, betting, and gambling, which were exempted from Goods and Services Tax (GST). It was assumed that these activities which were under the purview of discussion of GoM fell within the domain of lottery, betting, or gambling. Nonetheless, after engaging with stakeholders, further clarity was gained, leading to the submission of the second report. It became apparent during the discussions that a lack of clarity persists regarding the differentiation between games of skill and games of chance. Games of chance fa ll under the category of betting and gambling, whereas games of skill do not. The absence of clear legislative provisions pertaining to the classification of games based on skill or chance compounds this issue and therefore depends on different Court judgements to define game of ski ll or game of chance. Moreover, he highlighted that the Ministry of Information Technology (MEITY) is actively working on formulating rules and classification of online gaming. Until such classification is established and comprehensive rules are framed, it was suggested that the Council may consider deferring any decision in this regard, as premature actions may adversely affect stakeholders turning the attention to the matter of casinos. The Honorable Minister expressed his opinion that a highest tax rate of 28% should be levied on the Gross Gaming Revenue (GGR), calculated at the table level rather than on individual transactions. This approach is in line with international practices, as tracking each and every transaction of an individual may prove to be arduous. Sikkim and Goa are the only two States having these casinos and both suggested that rate of 28% should be levied on the Gross Gaming Revenue (GGR).
6.4 Furthermore, he added that the GoM engaged in an extensive discussion on whether Horse racing classifies as game of skill or chance and should be treated as a separate category or encompassed within the realm of betting and gambling. It was opined that there is no distinct classification for games of skill, and they should be considered as part of the broader betting and gambling category. The Hon’ble Supreme Court in Dr. K.R. Lakshmanan case held that Horse Racing is a game of skill however, there is no legislative provision for mandating it as game of skill. There are also many cases which were bought out by West Bengal during the GoM meeting and these cases are related to lottery but horse racing was mentioned in those cases. Accordingly, a tax rate of 28% on the full face value was recommended by GoM for such games.
6.5 The Convenor of the GoM acknowledged that despite multiple deliberations and expert opinions, the main challenge lies in the fact that the GoM addresses three different games compounded by the inherent ambiguity in existing legislation regarding whether these are games of skill or chance. Hence, ambiguity has been left to be resolved by the Courts which complicate the matter more. Moreover, the report highlights the dual nature of this issue, where economic growth and job creation stand in contrast to the adverse social impact on the youth. Achieving a delicate balance between these competing interests necessitates a phased approach to tackle this issue.
6.6 He stated that in conclusion, the GoM Report underscores the complexity of the subject matter, urging careful consideration and a comprehensive approach by all the States to address the concerns and interests of all stakeholders.
6.7 The Hon’ble Member from Gujarat concurred with the viewpoint of convenor and acknowledged that the decision at hand on Casinos predominantly affects two States. The Minister highlighted that a team from the Group of Ministers (GoM) had visited the affected areas and in their opinion, the value should be calculated on the Gross Gaming Revenue (GGR).
6.8 The Hon’ble Member from Tamil Nadu expressed the view that the State had already issued a notification prohibiting online gambling and online games of chance. The Minister suggested that the same could be true for some other States also. As online gambling and online games of chances are banned in Tamil Nadu, any decision by GST Council should conform with such State legislation. Regarding horse racing, the Minister proposed that if it is deemed a game of skill, a tax of 28% should be levied on the GGR value. Conversely, if it is classified as a game of chance, the full value at a tax rate of 28% should be considered. There should be a mechanism to receive and segregate the money. The receipt money should be directly deposited into operator account and an escrow separate account should be there to hold the prize money for eventual payout.
6.9 The Hon’ble Member from Maharashtra adopted a resolute stance, emphasizing the urgent need to reach a long-awaited decision on the meeting day. The Minister recommended that on line gaming, casinos, and horse racing be incorporated into entry 6 of Schedule III of the Central Goods and Services Tax (CGST) Act, 2017 alongside lottery, gambling, and betting as taxable actionable claim. The Minister stated that delving into the specifics of what constitutes a game of skill or chance is unnecessary as the law should be straightforward, easy and simple. The interpretation of games of skill and chance is subjective within the realm of law which would create confusion on tax point of view. In addition, the Minister asserted that activities detrimental to social well-being should not be encouraged or promoted.
6.10 The Hon’ble Member representing Uttar Pradesh expressed the urgency of taking the decision. He conveyed that two reports have been compiled so far. First report was submitted with the consensus of al I States. However, after submission of first report in the Council Meeting, the perspective on the matter changed. Uttar Pradesh maintained a steadfast view that a tax of 28% should be levied on the full-face value. The Minister also highlighted the absence of a mechanism for calculating Gross Gaming Revenue (GGR) and that it would generate negligible tax revenue. He also asserted that any game involving monetary transactions should be categorized as a game of chance rather than a game of skill. Moreover, he informed the Council that international jurisdictions also impose multiple taxes in addition to GGR. Furthermore, he expressed his belief that Horse Racing is not a game of skill, but rather a game of chance, given that individuals predominantly place bets on it without adequate knowledge or through guesswork. Consequently, he advocated for taxing all such games at the highest tax rate based on their full-face value.
6.11 The Hon’ble Member from Goa disagreed with the views of the other States and emphasized the significance of the matter for their State. He likened the evaluation of different categories of games to the act of comparing apples and oranges. He apprised the Council of the necessity to follow internationally accepted best practices that would prevent the closure of industry. He suggested that the Goods and Services Tax (GST) should be imposed based on GGR. He added that during the preparation of the second report, experts evaluated the matter from various perspectives and varied opinions from stakeholders were also sought which is the main reason for the lack of a firm recommendation from the Group of Ministers (GoM) and the report remaining inconclusive. Furthermore, he asserted that this subject is still evolving over time. He further proposed that the cardinal principle of GST is to align the pre-GST tax regime with the present one. He informed the Council that Goa previously levied a maximum entertainment tax of 15% on Casino industry and it was never 28% or not even 18%.
6.12 The Hon’ble Member from Goa highlighted the heavy dependence of Goa’s economy on tourism sector, particularly the Casino industry. He raised the issue of the revenue implications for the State if the decision led to the closure of the Casino industry strongly emphasizing the financial impact of such closure of casinos on the State. He also requested that if the consensus could not be reached on taxing the Casino industry based on GGR, a new Group of Ministers should be constituted including stakeholders as members. He cautioned that without proper regulation, the industry would not cease to exist but rather shift to a grey platform resulting in more adverse consequences. He further added that there is a new norm coming for 30% TDS apart from 28% of GST and resulting in 58% of total tax in case of winner. Lastly, he appealed for the tax rate to align with the pre-GST regime and be set at 28% based on GGR and requested the Council to decide in favour of Goa and Sikkim due to their dependency on Casino industry.
6.13 The Hon’ble Member from West Bengal expressed agreement with the stance of Minister of Uttar Pradesh and proposed that the tax rate should be set at the highest level on the full-face value. She further recommended for amending the Schedule to include Online Gaming, Casinos, and Horse Racing in the entry of actionable claim.
6.14 The Hon’ble Convenor of GoM stated that there is no dispute regarding the tax slab, as all States agree to tax it at the highest rate of 28%. The only point of contention revolves around the valuation. Furthermore, he explained that the change in perspective from the 1st report occurred due to a major dispute regarding the definition of an actionable claim. Initially, the stance was that all games had a genesis in betting or gambling. However, it later became apparent that these games also involve an element of skill, which became a subject of legal controversy and this is the reason that the definition must be amended.
6.15 The Hon’ble Union Finance Minister responded that the Hon’ble Courts can decide them to be a game of skill or chance. However, the key question is whether the government can impose taxes on unregulated activities. She provided an example of crypto assets which are not regulated but are still subject to taxation and no Court has challenged this. She further added that these games involve value creation, whether with or without skill. She also stated that the governments have the right to tax that value and there is no legal conflict in doing so. It may be game of skill or game of chance and debate may be going on but tax should be imposed on these activities. She clarified that the Ministry of Electronics and information Technology (MEITY) is in the process of formulating technical regulations related to online gaming. MEITY is working on regulatory framework in that domain. These types of regulations do not affect the GST Council and do not infringe upon its sovereign right to impose tax.
6.16 The Hon’ble Member from Uttar Pradesh reiterated his earlier views and stated that the main purpose of going to Goa is tourism for beaches, environment and only few tourists go to casino. If a person is ready to lose money in casino, he must be ready to pay taxes for the welfare schemes.
6.17 The Hon’ble Member from Maharashtra expressed the opinion that tax should be charged on the full- face value and it is up to the Council to decide whether it should be set at 18% or 28%. Before calculating tax, a suitable abatement in face value may be given. Secondly, he firmly stated that online gaming and racecourse are not games of skill on the part of person betting, and they should be taxed on their full value. He further added that the operators who are engaged in these activities are of high economic status and they should be treated accordingly.
6.18 The Hon’ble Member from Karnataka supported the views of Uttar Pradesh and Maharashtra. He argued against delving into the question of whether a game is based on skill or chance and stated that there are many court judgments deciding whether an activity is a game of skill or chance. The sovereign has the power to tax regardless of the nature of game. He highlighted that while the GST Council is primarily a body to take decisions on tax, it has also kept in mind the moral and social factors since its inception like imposing environmental cess, cess on sin goods and luxury goods based on moral principles. The tax on tobacco, luxury cars, and other items had sometimes exceeded their manufacturing value taking into account social principles. He suggested that gambling and betting have always been considered undesirable activities in our country and our taxation should be aligned with these social policies. He stated that all these three activities fall under the same legal category and granting the casino an exception tax on gross gaming revenue (GGR) based mechanism could lead to legal disputes in future. He advocated for maintaining a uniform law for all three activities. In addition, he supported views of Tamil Nadu and pointed out that on line gaming has had a negative impact on the youth, becoming an addiction for them. He expressed the view that no concession should be given to these activities and these should be taxed at the highest rate. He stated that he did not oppose the idea of treating casinos separately, but uniformity would be preferable. He also mentioned that the Karnataka Government bas been taxing race courses based on their gross value under the respective Acts since the beginning and litigation had only arisen in recent years even though tax was previously paid on the gross value only.
6.19 The Hon’ble Member from Kerala raised concerns about the impact of taxing on the basis of GGR mechanism on lotteries as it could lead to litigation. He stated that this approach may affect the taxation of other actionable claims.
6.20 The Hon’ble Member from Gujarat noted that the initial consensus in the Group of Ministers (GoM) was to impose the highest tax rate of 28% on all three activities. He expressed the need for a conclusive decision in the meeting as the matter has been dragged on without reaching a resolution.
6.21 The Hon’ble Member from Uttarakhand agreed with the proposal to tax all activities at the highest rate of 28%.
6.22 The Hon’ble Member from Delhi suggested that all three activities should be addressed separately. Since the States of Goa and Sikkim are the only ones directly affected by casinos, their situation should not hinder a decision on other sectors. She emphasized that the online gaming sector is rapidly growing and requires a decision. Furthermore, she stated that in the case of casinos, all States had a strong opinion but the affected States should have a greater say. She recommended that taxation based on the GGR mechanism would involve complex calculations and proposed that the full-face value should be taxed.
6.23 The Hon’ble Member from Nagaland stated that the Goods and Services Tax (GST) should not be considered as a form of charity but rather as a means to generate tax revenue for the nation. The Hon’ble member drew attention to the fact that gambling which encompasses these activities are bet based on either skill or chance, with the ultimate intention of earning money. It was suggested that tax should be levied on the full value of these activities without any exemptions as they are profit-oriented sectors.
6.24 The Hon’ble Member from Sikkim expressed agreement with the comprehensive and informative report presented by the Convenor, Group of Ministers (GoM). The Hon’ble Member informed the Council that the State of Sikkim aligns itself with the view put forward by Goa as documented in annexure on page 16 of Agenda No. 5. It was proposed that a GST rate of 28% be imposed based on the Gross Gaming Revenue (GGR) mechanism as this was tried and tested valuation method. Then he apprised the Council that prior to the implementation of GST, Sikkim taxed Casinos at the rate of 10% on the GGR value. Furthermore, he stated that presently, 28% GST rate is being charged and if the valuation method is altered, it would have a severe blow to the casino industry.
6.25 The Hon’ble Member then highlighted the distinction between these three activities despite their apparent similarities as mentioned in 2nd report of GoM. Specifically, the Hon’ble Member underscored that the unique feature of a casino is that each chip purchased by a player does not represent an actionable claim. It was opined that imposing GST on the full-face value of all chips purchased in a casino would be unjustifiable. The Council was informed that the annual revenue generated by the State of Sikkim from these activities amounts to approximately Rs. 20 crores which is a substantial sum for a small State like Sikkim where option of generating revenue is very limited. Casino industry is not bound to any season and it brings people throughout the year. He further requested the Council for separate rule for casino to levy of GST at the rate of 28 % on GGR. Regarding online gaming, it was suggested that an effective method for computing the value of the supply of online gaming may be determined by an inter-ministerial task force dedicated to this matter.
6.26 The Hon’ble Member from Chhattisgarh expressed agreement with the views presented by Uttar Pradesh. He highlighted the adverse impact of these activities on our society. He further emphasized the urgency of resolving this matter. It was recommended that a 28% GST rate be levied on the full value of these activities regardless of whether they involve game of chance or skill.
6.27 The Hon’ble Member from Arunachal Pradesh seconded the views of Uttar Pradesh and Meghalaya. He quoted example of Las Vegas and Macau which have no other attraction and where people go to play casino only whereas Goa is not only meant for casino and therefore, the rate of tax does not affect tourism sector of Goa.
6.28 The Hon’ble Member from Andhra Pradesh stressed the importance of considering the specific issues related to each State, keeping in mind the federal nature of the country and one nation one tax. It was stated that larger States have ample resources to generate revenue whereas smaller States are often at a disadvantage. The Hon’ble Member agreed with the views of Delhi and suggested that States like Goa and Sikkim should have some degree of flexibility in raising revenue in absence of other source of revenue.
6.29 The Hon’ble Member from Meghalaya reiterated that the procedures involved in each game are distinct therefore they should be taxed based on their individual intricacies. It was proposed that a single formula for calculation, could not be justified for every game. Additionally, the Hon’ble Member recommended making appropriate amendments to the law in accordance with the decisions reached in the Council to avoid any legal disputes.
6.30 The Revenue Secretary clarified that an amendment to the law is necessary as online gaming companies have argued in various courts that online gaming is an actionable claim but is not a taxable actionable claim in Schedule TII of the Central Goods and Services Tax (CGST) Act. They contend that it is a game of skill and does not involve any element of gambling or betting. The Council was informed that the GGR is typically only 10-15% resulting in an effective tax rate of l-3%. The Secretary strongly put across that even food items are taxed at a rate of 5% which is the lowest slab rate. Therefore, clarity must be brought through legislative amendments. It was mentioned that the draft amendments have been prepared carefully in consultation with the Additional Solicitor General of India. Furthermore, it was stated that the law should not be subject to interpretation regarding whether the activities are games of skill or chance. With regards to the issue of retrospectivity, the Secretary stated that claims for retrospective tax would continue but there would be no matter of dispute with regard to prospective implementation. Finally, it was emphasized that the Council is a taxing body and not a regulatory authority. So, Council should not be concerned with whether these activities are prohibited or regulated.
6.31 It was observed that all States are in agreement regarding the necessity of amending the law to provide clarity on these issues. The decision on whether this amendment should be addressed in the Law and Fitment Committee or brought back to the Council was left to the Council’s discretion with the aim of expediting the process. The Secretary suggested that the amendment may be brought through ordinance or through legislature in next session so that Revenue could be collected on these activities as soon as possible.
6.32 Thereafter, the Hon’ble Chairperson sought confirmation of the Council members on all three issues (i) the issue of amending the law to include Casino, Race Course, and Online Gaming in Entry 6 of Schedule Ill of the CGST Act, 2017 alongside Lottery, Betting, and Gambling. This inclusion would help avoid any interpretational confusion. She clarified that the exemption previously granted for GST on actionable claims except for Lottery, Betting, and Gambling in Entry 6, would now be amended so as to remove any confusion, to exclude Online Gaming and Horse Racing from exemption which would be subject to GST without any exemption, (ii) the rate of tax and (iii) the value for supply.
6.33 The Hon’ble Member from Meghalaya expressed his agreement for the amendment deeming it necessary and suggesting that the first report of the GoM (Group of Ministers) would suffice after such amendments. The Revenue Secretary then informed the Council that a few more amendments would be worked out by the Law Committee and circulated to the respective States for amendments in their State GST Act subject to the Council’s approval.
6.34 The Hon’ble Member from Karnataka proposed to include an explanation in Entry 6 to incorporate these games rather than amending the entire entry. Similarly, the Hon’ble Member from Tamil Nadu suggested that the final draft of the amendment should be shared with all States. In response, the Revenue Secretary stated that States like Tamil Nadu and Karnataka who wished to be involved, could be included in the Law Committee to ensure a concurrent decision.
6.35 Taking into consideration the concern raised by Tamil Nadu, the Hon’ble Chairperson sought the Council’s wisdom on whether if any State has a Jaw banning certain activities like Online Gaming and the Council deems fit to tax that activity then would the amendment contradict the State Law. The Revenue Secretary clarified that even currently, the Council imposes taxes on Gambling and Betting, despite them being banned in certain States. He explained that the Council could only decide the taxability of activity and the States regulate these activities. The Hon’ble Member from Karnataka and Kerala agreed with the explanation given by Revenue Secretary.
6.36 The Revenue Secretary then requested the Council to decide the tax rate and valuation method for these activities. He stated that uniformity in taxation for these activities was preferred, however during consultations with the ASG (Additional Solicitor General), he indicated that differential treatment could also be considered. He further mentioned that there was consensus among all States to tax Online Gaming and Race Courses at 28% GST on their full value. The only remaining issue was that of Casinos to be decided upon.
6.37 The Hon’ble Chairperson urged the Council to focus on executing and implementing the law on these activities requesting practical and executable solutions rather than idealistic opinions.
6.38 Hon’ble Member from Goa and Sikkim strongly advocated for differential taxation of Casinos based on the Gross Gaming Revenue (GGR) mechanism.
6.39 However, the Hon’ble Chairperson informed the Council that a consensus had been reached among the States to tax Online Gaming and Race Courses at 28% on the full-face value. She requested the Council to decide on the request made by the States of Goa and Sikkim to treat Casinos differently and tax them based on the GGR mechanism.
6.40 The Hon’ble Member from Chhattisgarh, Kerala, and Karnataka expressed their opinion that the principle of law should not be different for Casinos compared to other activities as it could have far-reaching effects on other services. The Hon’ble Member from Karnataka suggested that the principle of law should be the same for all activities and taxed on face value while the tax rate could vary. The Hon’ble Member from Maharashtra also agreed with this view and proposed taxing Casinos at 28% initially with the possibility of providing an abatement.
6.41 The Hon’ble Member from Nagaland stated that if casino was pan India and same rate would not prevail, then it could have repercussion. As casino is specific to only two States i.e. Goa and Sikkim thus exceptions could be made. Casino is lifeline for these two States and it would have huge impact on their revenue.
6.42 The Hon’ble Member from Andhra Pradesh expressed the belief that only the States of Goa and Sikkim would be affected by this taxation policy and it would benefit them in some way. He suggested that there would be no harm in treating Casinos differently or applying a different tax rate compared to other activities.
6.43 The Hon’ble Member from Meghalaya suggested that since Betting and Gambling were already included in Entry 6 giving different treatment to Casinos would create confusion. He proposed that either the two States could tax Casinos outside the GST regime or the definition of full face-value could be worked upon to suit the affected States.
6.44 The Hon’ble Member from Goa requested that Casinos can be taxed based on the GGR mechanism and suggested that the Council could review this decision if it does not work out as expected.
6.45 Addressing the concerns raised by the Hon’ble Member from Goa, the Hon’ble Chairperson requested to have trust in the Council and its functioning, highlighting that the Council is taking a rigorous approach to find a solution that benefits every industry and State.
6.46 In light of the urgency to resolve this long-standing issue, the Hon’ble Chairperson urged the Council to come to a final decision. The Hon’ble Chairperson stressed that the solution should not be too burdensome which may lead to the closure of any industry while also maintaining moral correctness.
6.47 The Hon’ble Member from Goa requested that Casinos should be taxed at an abatement of 60% resulting in an effective tax rate of 11.2% which is around 12% and then casino industry would survive.
6.48 The Hon’ble Member from Uttar Pradesh then expressed that it is neither socially nor morally right to support any State in the name of Casino and it will give wrong message to the public. He further added that Goa may be facilitated by other means but not through the measure as suggested.
6.49 Considering the viewpoints expressed by the majority of States, the Hon’ble Chairperson stated that since the proposal of the Hon’ble Member from Goa was not acceptable to the Council, the decision was to tax Casinos at the rate of 28% on their full-face value.
Decision: The Council decided to clarify that actionable claims supplied in Casinos, Race course and Online gaming are also under the purview of GST to be taxed at the rate of 28% on full face value irrespective of whether the activities are a game of skill or chance. Accordingly, the law may be amended to provide clarity on the matter.
7. Agenda Item 6: Recommendations of the 18th and 19th IT Grievance Redressal Committee for approval/decision of the GST Council
7.1 The Secretary requested JS, GST Council Secretariat to present the agenda item regarding recommendations of the 18th and 19th meetings of the IT Grievance Redressal Committee (ITGRC) before the Council.
7.2 JS, GST Council Secretariat then presented the recommendations of the 18th and 19th meetings of the IT Grievance Redressal Committee (ITGRC) on the data fixes carried out by GSTN as per the Standard Operating Procedure approved by the Council, as detailed in the agenda notes.
7.3 The Secretary then sought the comments of the Hon’ble Members of the Council on the recommendations of ITGRC and the Council approved the same.
Decision: The GST Council approved the recommendations made by the ITGRC during its 18th and 19th meetings.
8. Agenda Item 7: Scheme of budgetary support under GST regime in lieu of earlier excise duty exemption schemes to eligible manufacturing units under different Industrial Promotion Schemes of the Government of India
8.1 The Secretary introduced the agenda regarding scheme of budgetary support under GST regime in lieu of earlier excise duty exemption schemes. The Secretary informed the Council that the issue arose because of the Hon’ble Supreme Court’s judgement dated 17. l 0.2022 in the case of Mis Hero Motocorp Ltd. and Sun Pharma Laboratories Ltd. Vs Union of India & Ors. wherein the Hon’ble Court held that the appellant’s claim based on promissory estoppel was without substance, however, their claim deserved due consideration and allowed the appellants to represent before the concerned State Governments and the GST Council. The Hon’ble Court directed the Council and the State Governments to consider representations made by the appellants on the subject. The Secretary informed the Council that the issue had been discussed in an earlier meeting and it had been decided that the decision to continue with any incentive given to specific industries in existing industrial policies of States or through any schemes of the Central Government, shall be with the concerned State or Central Government.
8.2 The Secretary stated that there appeared to be no need to revisit the decision and that the Council may reject the representations so received in this regard. In the officers’ meeting, the States had expressed their inability to devise such a scheme as they were already implementing other incentive schemes.
Decision: The Council agreed to continue with the existing scheme of budgetary support whereby reimbursement of 58% of the net CGST and 29% of net IGST was granted to the eligible manufacturing units in specified States and rejected the representations received for the balance 42% of the net CGST and 21 % of net IGST.
9. Agenda Item 8: Ad-hoc Exemptions Order(s) issued under Section 25(2) of Customs Act, 1962 to be placed before the GST Council for information.
9.1 In the 26th GST Council meeting held on 10th March, 2018, it was decided that all ad hoc exemption orders issued with the approval of Hon’ble Finance Minister as per the guidelines contained in Circular No. 09/2014-Customs dated 19th August, 2014, as was the case prior to the implementation of GST, shall be placed before the GST Council for information.
9.2 Accordingly, the ad hoc exemption orders issued on 28th March, 2023 on request from Shri Maneesh P.M. for exemption from payment of IGST under sub- section (7) of section 3 of the Customs Tariff Act, 1975 on import of drug Injection Qarziba for baby Niharika G.M. was placed before the Council.
Decision: The Council took note of the ad hoc exemption order.
10. Agenda Item 9: Report of Group of Ministers (GoM) on GST System Reforms
10.1 The Secretary requested the Hon’ble Member from State of Maharashtra to present Agenda Item 9 i.e. the Report of Group of Ministers (GoM) on OST System Reforms. The Member stated that the Commissioner of State taxes would be making the presentation on the report.
10.2 The Commissioner of State taxes, Maharashtra made a presentation (Annexure -6). He informed the Council that the GoM on GST System Reforms was formed on 18th September, 2021 and the main Terms of Reference were to suggest changes in the business processes and TT Systems to plug revenue leakages, suggest better measure for compliance and revenue augmentation and to co-ordinate between different tax authorities. The GoM comprises Members from the States of Maharashtra, Haryana, Delhi, Assam, Andhra Pradesh, Odisha, Tamil Nadu, and Chhattisgarh. He further stated that this GoM is a Standing GoM and submits its report periodically as and when meetings are held. He informed that the GoM has held three meetings to date and that the report of the 2nd Meeting held on 10th February, 2022 was tabled and accepted by the Council in its 47th Meeting.
10.3 He further informed the Council that the 3rd Meeting of the GoM was held on 13th February, 2023 and that the recommendations of this third meeting are being tabled before the Council. He stated that the GoM in its third meeting considered 6 agenda items and that they would be taken up individually.
10.4 The first agenda item that was considered by the GoM was regarding the hard locking of Table-4 of GSTR-3B and it is basically about the credit that is being claimed in FORM GSTR-3B to be locked with the credit that is available in the FORM GSTR-2A. He informed the Council that the GoM after due deliberations has concluded that the hard locking of Table-4 of GSTR-3B is not feasible as of now as there are many comer situations that would cause inconvenience to the taxpayers if hard locking is done. The GoM as a first step has recommended that a rule based on gap in ITC utilization can be implemented in a phased manner on similar lines as mismatch between GSTR-l/3B system which is already under implementation.
10.5 The second agenda item that was considered by the GoM was regarding the tracking and identification of Non-Existent Tax Payers (NETP). He stated that with respect to fake entities detected there is a need to have a national database as it will help in the tracking and recovery of fake ITC flow credit. Having a computerized system will help in tracking these fake entities spread across different States. He also stated that many commonalities are observed in these fake entities such as they use the same mobile number, PAN number, Aadhar etc. and having a common repository will enable sharing of these data across various States. The major recommendations made by the GoM with respect to this agenda item are the need to formulate an SoP for handling these NETPs, a uniform policy of ab-initio cancellation of these NETPs across State/CBlC zones and to develop a System driven solution to facilitate the declaration of NETPs by the tax administrations and to develop a System based communication regarding recipients of ITC from NETP, among the various States tax administrations for smooth coordination of follow-up investigations.
10.6. The third agenda item that was considered by the GoM was regarding the Reporting of transactions by payment gateways & banks. He stated that the monitoring of B2C transactions is at present weak and that at present GSTN is unable to validate these transactions. It was recommended by the GoM that the data available from NPCl, RuPay, and VlSA/Master Card can be compiled and this can be checked against the details provided by the registered person regarding turnover. He further informed the Council that this recommendation is in its initial stage and that the details need to be worked out. The GoM has recommended forming a committee to develop a detailed methodology and to hold detailed consultations with NPCI and RBI to implement this recommendation.
10.7 The fourth agenda item that was considered by the GoM was regarding the HSN-level reporting in GSTR-1. Commissioner Maharashtra informed the Council that in the init ial phases, the dealers are not disclosing the full turnover commodity wise and therefore, it is proposed to make this compulsory in a phased manner. The GoM has recommended a phase-wise and time-bound approach to be adopted for action against non-compliant taxpayers with nudging messages and e-mails in the initial phase and blocking of GSTR-1 to be considered for failure to fill HSN details in the later phase.
10.8 The fifth agenda item that was considered by the GoM was regarding the proposal for integration of Income Tax, ICEGATE and other data points to address underreporting of supplies and to address the issue of under-reporting of Import of Services. On integration with Income Tax and ICEGATE the GoM suggested that DoR may coordinate the same. The benefit to GST on matching with these data points are quite obvious. In this regard, the Hon’ble Member from Karnataka suggested the committee could also explore the possibility of integrating the data that is available with the Ministry of Corporate Affairs.
10.9 The Commissioner of State Taxes Maharashtra further stated that at present all supplier data on goods and,, services are triangulated on the domestic side, but for the import of services, there is no triangulation of data as it is an independent field reported by the taxpayer. It was also informed to the Council that data is available with RBI for foreign remittance and the proposal was to explore the possibility of triangulating foreign remittance data with RBI with the import of services data reported by the registered person. He further informed the Council that this recommendation is in its initial stage and that the GoM has recommended forming a committee of Officers from TPRU-1, GSTN, Centre, Maharashtra, and RBI to make a detailed report on this proposal.
10.10 The sixth agenda item that was considered by the GoM was regarding the development of MIS. He also informed the Council that two requests were received from State of Tamil Nadu and Odisha for the development of MIS. The first request was from Odisha for the development of MIS for commodities liable for GST under RCM and the second request was from Tamil Nadu for the development of MIS for auto-populated interest on account of late payment of tax in cases where GSTR 3B is filed late. He informed the Council that the GoM has approved the development of MIS.
10.11 He further informed the Council that the GoM has felt that the entire GST network and system should move towards strengthening the registration process by using biometric validations and premises verification, controlling the flow of fake ITC at both ends, i.e. the recipient and the supplier of a supply and also expanding the use of third-party data for better forecasting of turnover and other verifications of taxpayers.
10.12 The Secretary proposed that the Council could accept the report of the GoM and that the recommendations made by the GoM can be implemented by GSTN in consultation with the Law committee.
Decision: The Council accepted the recommendations made by the GoM on System Reforms.
11. Agenda Item 10: Proposal for creation of State Co-ordination Committee comprising of GST authorities from the State and Central Tax Administration
11.1 The Secretary presented the Agenda No. 10 regarding creation of State Level Co-ordination Committee comprising GST authorities from the State and Central Tax Administration. He informed the Council that the proposal had come up during the National Coordination Committee meeting that was held in April, 2023 with the tax authorities from both Centre and State.
11.2 The Secretary informed the Council that the Committee would be co-chaired by the Chief Commissioner/ Commissioner of CGST/SGST and that they shall be co-convener on rotational basis for one year each. He further stated that the Committee shall meet at least once every quarter or as the co-Chairs decide. He further informed that the committee will deliberate on co-ordination issues relation to enforcement, investigation, audit, grievances and any other matter as agreed to by co-Chairs. He also informed that the agenda was discussed in detail in the Officers’ Meeting.
11.3 The Hon’ble Member from Uttar Pradesh welcomed the proposal and stated that Committee would be a welcome step towards co-ordination between tax authorities.
11.4 The Secretary further requested the Council that, once orders are issued for constitution of Committee, to ensure that the Committee meets regularly so that concerted and coordinated efforts can be made towards coordination at State level.
Decision: The Council approved the proposal for creation of State Co-ordination Committee comprising of GST authorities from the State and Central Tax Administration.
12. Agenda 11: Implementation of GS TAT consequent to passing of Finance Act, 2023
12.1 The following issues under the agenda were placed for consideration of the GST Council:
a. The GST Council may recommend a suitable date for notifying the amendments to CGST Act, 2017 made vide Finance Act, 2023. Accordingly, the States/UTs with legislature may also notify the corresponding amendments in their respective Acts. The GSTAT would be constituted after these amendments are notified.
b. As per Section 110(4)(b)(iii), the Chief Secretary of a State is to be nominated by the GST Council as a Member of the Search Cum Selection Committee for all other cases than the Technical Member (State) of the State Tribunal.
c. For States having a common Bench but separate High Court, it may be clarified that the appeal arising out of GSTATorder in such cases will fall within the jurisdiction of the High Court of the State where the taxpayer is located.
d. The proposed Number of Benches along with their jurisdiction in States /UTs with legislature.
12.2 The Secretary presented the agenda and made a brief presentation. The presentation (attached as Annexure-7) summarized the State-wise Benches requested (sorted in descending order of the number of taxpayers in each State) along with domestic GST collection figures from each State i.e. collections net of IGST on imports. He brought to the notice of the Council that each Bench comprises 4 Members and, thus, each Bench effectively means two functional Benches.
12.3 The Hon’ble Member from Uttar Pradesh stated that Uttar Pradesh has the highest number of taxpayers and the highest population in the country with a wide geographical expanse. He informed the Council that for these reasons they have proposed five Benches at Lucknow, Agra, Prayagraj, Varanasi and Ghaziabad. This had been cleared by the State Cabinet earlier as also discussed by the Council in its 39th and 40th meetings. This may be cleared without reduction.
12.4 The Hon’ble Member from Maharashtra stated that Maharashtra has 20% share in the GST revenue and appealed that as proposed seven Tribunals in their State should be recommended.
12.5 The Hon’ble Member from Tamil Nadu requested for three Tribunal Benches at Chennai, Madurai and either at Coimbatore or Salem considering their population. While the request from the State Government had not been sent earlier, their suggestion may be taken now.
12.6 The Hon’ble Member from Punjab stated that they propose to form two Tribunal Benches. They have communicated for only for one Bench at Chandigarh/Mohali and will be deciding on the location of the second Bench soon and communicate the same.
12.7 The Hon’ble Member from Andhra Pradesh stated that considering the geographical diversity in the State and poor road connectivity in certain areas, they have proposed three Benches.
12.8 The Secretary brought out the total number of Benches suggested by the States is coming to around 50. This means selection of nearly 200 Members. In the initial days, the workload with the Benches may not justify this high number. Accordingly, in the Officers’ meeting, States were requested to begin with few Benches. It needs to be kept in mind that one Bench in effect means two functional Benches. If we were to proceed in one go to do these many recruitments, there may be some compromise on the quality. It will be a better idea to proceed in a staggered manner while agreeing to the suggestions from the States.
12.9 The Secretary suggested that initially, all the State Capitals may have one Bench (other than North-Eastern States and Sikkim). In addition, there may be Benches at location of High Court Benches. For instance, U.P. has High Court Benches at Lucknow and Allahabad. They can have two Benches, which will mean four functional Benches. Similarly, Maharashtra and Rajasthan can have two Benches. This is only in first phase and as they are filled up and made operational, we can proceed to higher numbers. The requests received can be approved, subject to the condition that in the initial phase, the process is started with Benches at State Capitals and places where High Court Benches are located.
12.10 The Hon’ble Member from Uttar Pradesh stated that at least three Benches should be recommended in the first phase and the request made should not be cancelled.
12.11 The Hon’ble Chairperson clarified that the Benches as proposed by the States were not being reduced but the idea was to start with fewer Benches in the initial phase. The other Benches may be set up subsequently.
12.12 The Hon’ble Member from Kerala stated that the proposal of Kerala is to set up 3 State Benches with locations at Thiruvananthapuram, Ernakulam and Kozhikode. In the initial phase, as suggested in this meeting, due to lesser pendency of cases, two benches even with half the members may be made functional at Thiruvananthapuram and Ernakulam. Since the other areas in the state are quite far from these two locations, there may be provisions for these benches to conduct sittings in other locations such as Kozhikkode also to hear the cases belonging to those locations. Agreeing with the suggestion, the Revenue Secretary clarified that the same can be done at their level by setting up sitting/ circuit Benches. The same can be enabled so that more cities can be covered by one State Bench. He stated that State Bench and sitting/circuit Bench could be located in different cities for wider geographical representations with two Members each.
12.13 The Hon’ble Member from Chhattisgarh stated they were in agreement with this arrangement and would have two Benches starting with Raipur and then at Bilaspur.
12.14 The Secretary summed up that post discussions the final consensus is to have limited number of Benches to begin in first phase. On the issues of jurisdiction of the Benches, the Secretary informed that the information would be collected from the States which may need to provide the details of jurisdiction of proposed Benches and with the approval of the Hon’ble Chairperson, the same would be placed before the Council for ratification.
12.15 The Secretary further suggested that the Chief Secretary of Uttar Pradesh or Maharashtra may be nominated as a Member of the Search cum Selection Committee. He stated that these two States have the highest number of taxpayers. The Hon’ble Member from Karnataka suggested that Chief Secretary Karnataka may be nominated as a Member of the Search cum Selection Committee. The Secretary stated that if it was agreeable to all, the Chief Secretary of Maharashtra may be nominated as a Member of the Search cum Selection Committee as Maharashtra had the largest share in OST revenue and the second largest number of GST taxpayers in the country. He also suggested that this nomination may be for one year and be made on a rotation basis for subsequent years. He brought out that selections will be required to be done every year due to constitution of new Benches, turnover of members due to resignations, retirements etc.
Decisions:
a. The Council recommended that provisions of the Finance Act, 2023 pertaining to the GST Appellate Tribunal may be notified by the Centre with effect from 01.08.2023. This will pave the way for the early setting up of the Benches of the GST Appellate Tribunal.
b. Further, the Council recommended that the Chief Secretary of Maharashtra be nominated as one of the Member of the Search cum Selection committee in terms of Section 110(4)(b )(iii) of the CGST Act 2017 for a period of one year.
c. It was clarified that for states having a common Bench but separate High Court, an appeal arising out of GSTAT order will fall within the jurisdiction of the High Court of the State where the taxpayer is located.
d. Regarding the number of State Benches, the Council recommended constituting the Benches as per proposal of the States. However, they may be operationalized in a phased manner based on the case load. The Council recommended to initially operationalize one Bench each in the major States. However, for States having High Court Benches at two or more places in the State, or large number of tax payers, it recommended to initially operationalize more than one Bench also. Moreover, a Bench may have sitting at more than one location (with two members at each location) which will enable more cities to be covered by the State Benches.
e. The jurisdiction of the Benches may be decided in consultation with the States concerned, with the approval of the Hon’ble Chairperson, and placed before the Council for ratification.
13. Agenda Item 12: Performance Report of Competition Commission of India (CCI) for month of December, 2022 and 4th quarter of the F.Y 2022-23 along with the Performance Report of State Level Screening Committee (SLSC), Standing Committee (SC) and Directorate General of Anti- Profiteering (DGAP) for 3rd quarter and 4th quarter of the F. Y 2022-23
13.1 The Secretary presented the Agenda No. 12 regarding Performance Report of Competition Commission of India (CCI) for month of December, 2022 and 4th quarter of the F.Y 2022-23 along with the Performance Report of State Level Screening Committee (SLSC), Standing Committee (SC) and Directorate General of Anti- Profiteering (DGAP) for 3rd quarter and 4th quarter of the F.Y 2022-23 for the information of the Council.
Decision: The Council took note of the same and approved the Agenda.
14. Agenda 13- Request for extension of due dates for filing GSTR-7, GSTR-1 & GSTR- 3B for the month of April, May and June 2023 and extension of Amnestv Schemes in the State of Manipur.
14.1 The Pr. Commissioner, GST Policy stated that a request has been received from State of Manipur for extension of due dates for filing of FORM GSTR 7, FORM GSTR-1 and FORM GSTR-3B for the months of April, May and June 2023 till 31.07.2023 for taxpayers of Manipur, due to prevailing law-and-order situation in the State. He informed that already, extension of due dates for filing of FORM GSTR 7, FORM GSTR-1 and FORM GSTR-3B for the months of April 2023 and May 2023 has been granted till 30th June 2023.
14.2 He also informed that State of Manipur has also requested for extension of the Amnesty schemes announced in the last Council meeting till 31st July 2023 in State of Manipur. He mentioned that these amnesty schemes were notified through notifications dated 31st March, 2023, on basis of the recommendations of GST Council made in 49th meeting, and the compliances as per the said amnesty schemes were to be done by 30th June, 2023. The details of amnesty schemes are as under:
(i) Amnesty to GSTR-4 non-filers was provided vide Notification No. 02/2023-CT;
(ii) time limit for application for revocation of cancellation of registration was conditionally extended vide Notification No. 03/2023-CT;
(iii) Amnesty scheme for deemed withdrawal of assessment orders issued under Section 62 was provided vide Notification No. 06/2023-CT;
(iv) Amnesty to GSTR-9 non-filers was provided vide Notification No. 07/2023-CT;
(v) Amnesty to GSTR-10 non-filers was provided vide Notification No. 08/2023-CT;
14.3 He also added that similar representations for extension of date of amnesty schemes have also been received from various other trade associations from other parts of the countries also.
14.4 He informed that the feasibility of implementing these requests was got examined through GSTN (Goods and Services Tax Network). GSTN has informed that while they can quickly make changes on an all-India basis for the extension of Amnesty schemes, implementing it specifically for a particular State would require more time due to coding requirements.
14.5 The issue was deliberated in Officers’ meeting held on 10th July 2023 and it was recommended by the Officers to extend the due dates for filing of FORM GSTR 7, FORM GSTR-l and FORM GSTR-3B for the months of April, May and June 2023 till 31.07.2023 for the taxpayers of State of Manipur. The Officers further recommended that the Amnesty schemes notified vide notifications dated 31.03.2023, as detailed in the Agenda, may be extended till 31st August, 2023 for all taxpayers across the country.
Decision: The Council agreed with the said recommendation made by the Officers in the Officers’ meeting.
15. Agenda Item 14: Review of the Revenue position under Goods and Service Tax
15.1 The Secretary presented the agenda on review of revenue position under GST and informed the Council that there were press releases from time to time indicating the revenue position. The Secretary to the Council informed that there is growth in the revenue of about 12% annually.
15.2 The Director (State Taxes), DoR stated that the average monthly collection of GST comes to about Rs. 1.70 Lakh Crore. Regarding unsettled IGST, the Director (State Taxes), DoR informed that compared to last year this year the balance is negative. However, the situation was improving. The Compensation Account was also in negative.
15.3 The Secretary informed the Council that the Compensation amount to all the States who had submitted AG Certificate had been released and there was no pendency. The Secretary requested the other States who had not submitted their AG Certificates to submit it on priority so that their payments could also be released in time.
15.4 The Hon’ble Member from Telangana stated that their IGST settlement and Compensation payment were still pending. To this, the Director (State Taxes), DoR informed that the amount as per the original AG Certificate submitted by the State had been released. The amount as per revised AG Certificate would be released in due course as and when revised Certificate was received in DoR. Further, regarding IGST Settlement, the Director (State Taxes), DoR informed that they were facing certain accounting issues. Those issues were discussed with Pr. CCA, CBIC. The amount due under [GST Settlement would be released after resolution of the accounting issues.
15.5 The Hon’ble Member from Andhra Pradesh also pointed out similar issue for the Financial Year 2018-19 and 2019-20. The Director (State Taxes), DoR informed that CAG had certified the amount but the Certificate was yet to be received by DoR. The due amount would be released after receipt of the Certificate.
16. Agenda 15: Any other agenda with the permission of the Chairperson
16.l The Hon’ble Member from Delhi brought to attention concerns over recent notification including Goods and Services Tax Network (GSTN) under the purview of the Prevention of Money-laundering Act (PMLA) without any formal discussion in the GST Council. The Hon’ble Member requested the Chairperson to take up the matter for discussion.
16.2 The Hon’ble Member of Tamil Nadu objected the notification issued by Union Government on PMLA that it is against the interests of traders and against the basic objective of decriminalizing violations under the Goods and services Tax Act. This will affect traders across the country. Tamil Nadu is opposed to this.
16.3 The Hon’ble Member from Punjab also requested the Council to discuss the matter and address the apprehensions of the trade regarding the Notification.
16.4 The Hon’ble Member from the West Bengal enquired about the necessity of publishing the notification. She stated that law enforcing agencies could have shared the data related to any fraud detection without even having any notification brought to that effect. Therefore, this matter should have necessarily been discussed in the Council before notifying anything that affects GST agencies.
16.5 The Hon’ble Member from Rajasthan also requested the Council to take up the matter for discussion on an urgent basis. Any defaults in tax payments were already being investigated by GST authorities and bringing enforcement of laws like PMLA in taxation matters would further create fear among traders.
16.6 The Hon’ble Member from Telangana informed the Council that there were many apprehensions among the industry members about the notification. These apprehensions should be addressed by way of an Agenda or a GoM might be constituted for deeper analysis. The matter may then be taken up in the next Council meeting and the implementation of the notification be deferred till that time.
16.7 The Hon’ble Member from Karnataka stated that since the issue involved sharing of data with GSTN, it was incumbent upon the Council to discuss the matter.
16.8 The Secretary to the Council clarified that the Notification under scrutiny is under Prevention of Money Laundering Act and is not under GST law. Secondly, the purpose of the notification was to equip and empower tax administration. As per the notification, Director, Financial Intelligence Unit would share information with GSTN regarding suspicious transactions filed by financial institutions. He read out the provisions of section 66, PMLA under which notification was issued and clarified that under these provisions of the Act, GSTN would only get information and the said reaction does not mandate GSTN to share any information. Such information shared by FIU would be further shared with concerned State and Central GST authorities and that information would empower the authorities to decide further course of action depending on merits of the case. Thirdly, this information was not circulated by Directorate of Enforcement but Director, FIU whose duty was to collect information regarding suspicious persons and suspicious transactions and communicate it to law enforcing agencies including ED, CBI, State Police, income tax and GSTN. This information was already being shared with about 30 other law enforcing agencies and the facility of sharing was being extended to GSTN so that the information could be shared with State and Central authorities too. Instead of sharing this information with each State or Central zone separately, the information would be shared with GSTN which was a common node for all tax agencies. Tn light of the discussions, it might be concluded that the notification does not give extraordinary powers to the tax authorities.
16.9 The Hon’ble Member from Maharashtra apprised the Council that no representations raising objections against the notification were received from any association in the State of Maharashtra. The Hon’ble Member highlighted that since the inception of the law, 5000 cases had been registered for the period 2005 to 2023. 2200 cases were registered between 2005 and 2014 while 2800 cases were registered between 2014 and 2023. Further, the total number of registrations in GST are 1 Crore 40 lakh approximately and the number of cases of violation were 5000 only.
16.10 The Hon’ble Member from Chhattisgarh pointed out that when PML Act was brought into effect, its preamble quoted the obligation of the country under United Nation Convention under which it was adopted. So, it was not foreseen at that time that such laws had something to do with tax regimes like GST. The aim was to target illicit drug trafficking, destabilization of the country, etc.
16.10 The Secretary to the Council reiterated that the provisions in the notification were not meant for empowering any Central tax agency with extraordinary powers. The information would be shared by FTU with GSTN electronically. The information would, further, be shared with Central and State GST authorities and it would be upon them to decide if any action was to be initiated.
17. In the end, the Secretary thanked the Union Finance Minister, the MoS, all the Members of the Council, and all the officers who had come from States, Centre, GSTN and the officers from Secretariat.
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