TaxTMI 
TaxTMI 
Minutes of the 2nd GST Council Meeting held on 30 September 2016
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. Treatment of the existing tax incentive schemes of the Central and State Governments Discussion on Agenda Items Agenda Item 1: Approval of the Draft Minutes of the 1st GST Council Meeting (22-23 September 2016) along with the Draft Rules of Procedure and Conduct of Business in the GST Council 4. The Hon'ble Minister from Punjab stated that in paragraph 37 (ii) of the draft minutes of the 1st GST Council Meeting (hereinafter called 'the draft minutes'), it should be amplified that revenue to be compensated shall, in addition to taxes, also include cesses and Input Tax Credit (ITC) reversals and adjustments. On the first issue, after discussion, it was agreed that in paragraph 37 (ii), the word 'cesses' shall be added. 5. In respect of the second issue (ITC reversals and adjustments), the Hon'ble Minister from Punjab stated that ITC reversals accounted for an additional revenue of ₹ 4,000 crore in his State. The Secretary to the Council observed that it was not desirable to subsume the amount related to ITC reversal for calculation of compensation as it was a distortion in the taxation system and only five States had such a provision in place. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar also opposed the idea of putting exemptions in the compensation formula. The Chairperson reiterated that additional issues being discussed today could not be made part of the Minutes of an earlier meeting. Such issues could be flagged for discussion in a later meeting. 9. The Hon'ble Minister from Odisha stated that in paragraph 22, correction should be made in the last sentence to the effect that the 'best 3 out of 5 years' would be taken into account to ascertain growth rate. The Hon'ble Minister from Rajasthan observed that the same correction should be carried out in the last sentence of paragraph 21. 10. Considerable discussion took place in respect of the Minutes relating to Agenda 5 of the 1st Meeting of the GST Council (Provisions for Cross-Empowerment). The Hon'ble Minister from Odisha stated that paragraph 47 (vi) (relating to Information-based enforcement powers) should be deleted as at point (ii) of the same paragraph, it had been mentioned that for traders/manufacturers of goods with a turnover above ₹ 1.5 crore, a committee of Central and State Government officials should suitably modify the cross-empowerment model presented in the meeti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed at was that in respect of goods, taxpayers with a turnover below ₹ 1.5 crore would continue to be administered by the States, as was the practice currently and for those with turnover above ₹ 1.5 crore, there would be concurrent jurisdiction of the Centre and States. In respect of Service Tax, he had stated that 11 lakh current assessees of Service Tax would continue to be administered by the Centre and this clearly implied that no division was proposed on the basis of ₹ 1.5 crore turnover. He also recalled that it was agreed that new Service Tax registrants would be allocated between the Centre and the State administrations on the basis of a protocol to be devised by officers and that arrangements shall be made to train State Government officials on Service Tax issues. He also recalled that he had mentioned that machinery of the Centre and the States needed to be used optimally for administration of GST. He observed that there were five limbs to the compromise decision on the subject of single interface through cross-empowerment and at this stage, only one limb of the decision could not be reopened; rather, the whole issue would get reopened. He observed that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ral Government, it should be allowed to handle Service Tax assessees exclusively for the first five years. The Hon'ble Chief Minister of Puducherry also recalled that for Services, it was decided that all 11 lakh existing Service Tax assessees would be administered by the Central Government. The Secretary to the Council brought to the notice of the House that big service providers in sectors such as telecom, banking, information technology, etc. had been representing that they should have a single registration and if that was not possible, they could at least be given the second best comfort of being audited by only the Central administration for initial years. He pointed out that contribution of Services to the Gross Domestic Product (GDP) of the country was 56% and the administrative structure should be such that it does not affect the growth of the Services sector and thus, of the GDP. 16. The Hon'ble Minister from Tamil Nadu stated that transition period should not be for 3 years and that it should be limited to 6 months. The Hon'ble Minister from Uttar Pradesh also supported this. The Hon'ble Minister from Punjab suggested reducing the transition period to one....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Meeting of the Council held on 22nd and 23rd September with the following amendments- a. Sub-paragraph 37(ii) to be replaced by 'Revenue to be compensated shall consist of all taxes (including cesses) levied by the States and which are now proposed to be subsumed in GST' . b. The last line of paragraph 21 to be replaced by 'The Hon'ble Minister from Rajasthan was of the view that as the compensation was for 5 years, the average growth rate of 5 years or the best 3 out of 5 years should be taken to ascertain the growth rate'. c. The last line of paragraph 22 to be replaced by 'The Hon'ble Minister from Odisha suggested that the best 3 out of 5 years be taken to ascertain growth rate and compensation payment be made monthly and adjusted at the end of the year on the basis of CAG-audited figures and also that the base year could be 2015-16'. (ii) In relation to Agenda Item no. 5 of the first meeting, namely "Provision for cross-empowerment to ensure single interface under GST", paragraph 39 to 46 where the discussions have been recorded was approved. In paragraph 47, the last sentence of the main body of the paragraph shall be replace b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated to all the States. 24. In respect of Agenda Item 2, the Council approved the Draft GST Rules on Registration, Payment, Return, Refund and Invoice, Debit/Credit Notes with the understanding that minor changes may be permitted with the approval of the Chairperson, if required, due to suggestions from the stakeholders or from the Law Department. Agenda Item 3: Treatment of the existing tax incentive schemes of the Central and State Governments 25. The Secretary to the Council explained that the Central and State governments had given various incentives of Central Excise and Value Added Tax (VAT) and Central Sales Tax (CST). He pointed out that in the GST regime, such incentives could not be continued as supplies would need to be made on payment of tax in order to permit flow of tax to the destination state. Therefore, a decision would need to be arrived at regarding the treatment of such tax incentive schemes under the GST regime. He observed that one option could be to 'grandfather' such schemes and provide for a budgetary apportionment in the State and the Central budgets for reimbursing the tax paid to those units which enjoyed tax exemption up to a specified perio....