TaxTMI 
TaxTMI 
Minutes of the 2nd GST Council Meeting held on 30 September 2016
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....ft GST Rules on Registration, Payment, Return, Refund and Invoice, Debit/Credit Notes 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 Rs. 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....
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.... as part of revenue and the same methodology should be adopted for GST. The Hon'ble Minister from Bihar 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 Rs. 1.5 crore, a committee of Central....
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....ns that took place in the 1st Meeting of the Council. He stated that the compromise arrived at was that in respect of goods, taxpayers with a turnover below Rs. 1.5 crore would continue to be administered by the States, as was the practice currently and for those with turnover above Rs. 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 Rs. 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 co....
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....for any loss of revenue and in order to give comfort to the Central 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 Mi....
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....ption of Draft Minutes from Paragraph 1 to 38 and Paragraphs 48-49 of the 1^st 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 appro....
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....ns from the stakeholders. He suggested that this could be done with the approval of the Chairperson and the same could be circulated 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....
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....d that once incentive schemes were withdrawn, the taxes paid would be accounted for in the Consolidated Fund of India and 42% of the amount would be devolved to the States. The Centre, therefore, could be expected to only reimburse the units out ofthe remaining 58% of the fund which was not part of the devolution and the States would also need to correspondingly reimburse such units out of the share of revenue received through devolution. 29. The Council approved the following- (i) All entities exempted from payment of indirect tax under any existing tax incentive scheme shall pay tax in the GST regime. (ii) 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. (iii) In case the State or Central Government decides to continue any existg exemption/incentive/deferral scheme, then it shall be administered by way of a reimbursement mechanism through the budgetary route, the modalities for which shall be worked out by the concerned State/Centre. 30. In conclusion, after discussing with the....
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....esh Shri Abhishek Mishra Designation Minister for Local Self Urban Government, Development and Housing Minister for School Education & Sports and Youth Welfare Minister for Finance Minister for Education Development and Vocational Skill 24 Uttarakhand Dr. Indira Hridayesh Minister of Finance 25 West Bengal Dr. Amit Mitra Minister for Finance and Excise Page 10 of 13 JAYNA BOOK DEPOT Estd. 1949 JAYNA MINUTE BOOK Annexure 2 (List of officers from the Centre and States) Name of Officer S No. Centre/State/UT 1. Govt. of India Shri Hasmukh Adhia 2. Govt. of India Shri Najib Shah 3. Govt. of India Shri Ram Tirath 4. Govt. of India Shri B.N. Sharma 5. Govt. of India Shri Arun Goyal 6. Govt. of India Shri Vivek Johri 7. Govt. of India 8. Govt. of India Shri P.K. Mohanty Shri Upender Gupta 9. Govt. of India Shri Udai Singh Kumawat 10. Govt. of India Shri Amitabh Kumar Ms. Aarti Saxena 11. Govt. of India 12. Govt. of India Shri Paras Sankhla 13. GST Council Shri Arun Goyal 14. GS....
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....er Commissioner, Commercial Taxes Additional Commissioner Secretary, Finance Commissioner, Commercial Taxes Jammu & 40. Kashmir Additional Commissioner 41. Kerala 42. Kerala 43. Madhya Pradesh 44. Madhya Pradesh 45. Madhya Pradesh 46. Maharashtra 47. Maharashtra 48. Manipur Meghalaya 49. 50. Meghalaya 51. Mizoram 52. Mizoram 53. Nagaland 54. Nagaland 55. Odisha 56. Odisha 57. Odisha 58. Puducherry 59. Puducherry 60. Punjab 61. Punjab 62. Punjab 63. Rajasthan 64. Rajasthan 66 Shri P.K. Bhat Dr. Rajan Khobragade Shri Shaikh Hassan Khan Shri Raghwendra Kumar Singh Shri Sudip Gupta Shri Kamal Shrivas Shri D.K. Jain Shri Dhananjay Akhade Dr. Shailesh Kumar Chourasia Shri Abhishek Bhagotia Shri Leo Khongsit Shri C Vanlalchhuana Shri H Hrangthanmawia Shri Asangba Chuba Ao Shri Wochamo Odyuo Shri Tuhin Kanta Pandey Shri Saswat Mishra Shri Sahdev Sahoo Dr. V Candavelou Shri G Srinivas Shri DP Reddy Shri Rajat Agarwal Shri Supreet Gulati Shri Praveen Gupta Shri Alok Gupta Page 12 of 13 Commissione....