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Minutes of the 6th GST Council Meeting held on 11 December 2016
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....016: 3. The Members suggested the following amendments to the draft Minutes of the 5th meeting of the Council (hereinafter referred to as 'the Minutes')- i. Section 1(2) (Short title, extent and commencement): The Hon'ble Minister from Jammu & Kashmir stated that his version recorded under paragraph 11(i) should be replaced with the following version: 'The Hon'ble Minister from Jammu & Kashmir suggested that Section 1 (2) may be amended so as to exclude Jammu & Kashmir by inserting the words "(except the State of Jammu and Kashmir)". Jammu & Kashmir would then take the process of extending the law further as required by the Constitution of India and the Constitution of Jammu & Kashmir.' The Council agreed to this suggestion. ii. Section 2(7), 2(8) and 2(106) (Definitions): The Hon'ble Deputy Chief Minister of Gujarat observed that in respect of amendments in the definition of 'agriculture' and 'agriculturist', four to five States did not agree to the new definition and in this regard, the following aspects should be considered: a. Instead of keeping activities out of the tax ambit, particular items should be exempted. b. As the t....
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.... Hori'ble Minister from Tamil Nadu observed that there was a typographical error in paragraph 11 (xiv) of the Minutes and the formulation 'as specified by the Council but not less than Rs. 50 lakh' should be replaced by the formulation 'as specified by the Council but not more than Rs. 50 lakh'. The Secretary to the Council clarified that the decision was correctly recorded and that the idea was to have a minimum threshold of Rs. 50 lakh for Composition scheme but it could be increased later due to factors like inflation. The Council agreed that no amendment was required in the Minutes on this issue. v. Section 9 (Composition Levy) and Section 8 (Levy and Collection of Central/State Goods and Services Tax): The Hon'ble Minister from West Bengal pointed out that the version recorded in paragraph 11(xvi) of the Minutes needed to be amended as he had raised the issue of reverse charge on unregistered purchases and then Gujarat and other States had supported it. He suggested to add the following as the first two sentences of this paragraph: 'The Hon'ble Minister from West Bengal raised the issue whether tax on reverse charge basis should be levie....
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....to verify from records whether or not it had been received by the buyers. He added that if this provision was extended to goods, this could create problem for those suppliers who supplied to the government departments or supplies made by small enterprises who might not get payment within three months. He further added that at times quality testing etc. on goods could take longer than three months, and payment could be delayed on that account too. The Hon'ble Minister from West Bengal did not agree with this submission and observed that there could be fake bills for goods also. Shri. G.D. Lohani, Commissioner (Central Excise), CBEC further explained that for goods, controls were already built in, such as issue of electronic permits through GSTN, and therefore introducing another layer of compliance burden was not required for goods, whereas in services, a large number of bills were raised merely in the name of consultancy. After discussion, the Council agreed to keep similar provision for goods and services and agreed that the time period for making payments shall be increased from three months to six months from the date of issuance of invoice. ix. Section 22 (Manner of recov....
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.... recorded in paragraph 18 of the Minutes, and requested to add the following as his version: 'The Hon'ble Minister from Rajasthan stated that cross-empowerment was required in all three Acts as otherwise the aim of single interface would not be achieved.' The Council agreed to add the version of the Hon'ble Minister from Rajasthan. 4. In view of the above discussions, for Agenda item 1, the Council decided to adopt the Minutes of the 5th meeting of the Council with the following changesi. i. To replace the version of the Hon'ble Minister of Jammu & Kashmir recorded in paragraph 11 (i) of the Minutes with the following - 'The Hon 'ble Minister from Jammu & Kashmir suggested that Section 1 (2) may be amended so as to exclude Jammu & Kashmir by inserting the words "(except the State of Jammu and Kashmir)". Jammu & Kashmir would then take the process of extending the law further as required by the Constitution of India and the Constitution of Jammu & Kashmir.' ii. To add the following version of the Hon'ble Minister from West Bengal as the first two sentences of paragraph 11(xvi) of the Minutes - 'The Hon'ble Minister from West Bengal ra....
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....the Minutes, the version of the Hon'ble Minister from West Bengal recorded in respect of cross-empowerment under IGST to be replaced by the following: 'The Hon'ble Minister from West Bengal stated that without cross-empowerment, no audit could be done and that taxpayers up to Rs. 1.5 crore turnover should be exclusively left to the States.' xi. To add the following version of the Hon'ble Minister from Rajasthan in paragraph 18 of the Minutes - 'The Hon'ble Minister from Rajasthan stated that cross-empowerment was required in all three Acts as otherwise the aim of single interface would not be achieved.' Agenda Item 2: Approval of the Draft GST Law, the Draft IGST Law and the Draft GST Compensation Law: 5. The Hon'ble Chairperson observed that in the last meeting, the Council had discussed up to Section 46 of the draft Model GST (hereinafter referred to as the 'GST Law') law and he invited comments of the Members from Section 47 onwards. The Hon'ble Minister from West Bengal pointed out that there was certain contradiction between Section 4 and Section 5 of the GST Law in respect of the jurisdiction of the SGST officer and this nee....
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.... an inverted duty structure. The Secretary to the Council explained that this provision was required in order to address situations like tax on works contract where the tax could be, say, 12%, but tax on inputs such as cement, steel etc. could be higher, and in such cases, it would not be advisable to give entire amount of refund arising out of duty inversion. The Commissioner (GST Policy Wing) CBEC further added that this provision was required keeping in view the four band tax structure of 5%, 12%, 18% and 28% earlier agreed upon by the Council. The Hon'ble Ministers from Uttar Pradesh, Karnataka and West Bengal supported the proposal. The Council agreed to this suggestion. iv. Section 48(1) (Refund of tax): The CCT, Telangana observed that the twoyear period allowed for claiming refund was too long, and should be reduced to one year. Shri P.K. Mohanty, Consultant, CBEC explained that it was a trade friendly provision and it was in tune with the larger period allowed for demanding short payment of tax from the taxpayer. The Hon'ble Minister from Karnataka stated that in certain cases, the business practice could be such that not all documents might be put in place withi....
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....five years. The Hon'ble Minister from Uttar Pradesh suggested that alternately, the revisional power of the Chief Commissioner/Commissioner could be reduced to two years. The Hon'ble Minister from Haryana supported the proposal to increase the period of retention of record to six years so that more time could be given to officers to issue notice. The Hon'ble Minister from Tamil Nadu and the Deputy Chief Minister of Delhi informed that in their V AT legislations, the period of retention of record was six years. After discussion, the Council decided to increase the period of retention of records in section 54 to six years. vii. Section 55 (Special procedure for removal of goods for certain purposes): The Hon'ble Minister from Tamil Nadu stated that the definition of 'job worker' should include unregistered persons. The Commissioner (GST Policy Wing), CBEC clarified that Section 2(61) made it clear that only a registered taxable person could send the goods for job work and not an unregistered person. In view of this the Council agreed not to make any changes. viii. Section 56(1) (Collection of tax at source): The Hon'ble Minister from West Bengal pointe....
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....dvance ruling and provisional assessment. The Consultant, CBEC clarified that advance ruling covered seven subjects whereas provisional assessment was limited to two subjects, namely value of goods and the applicable rate of tax. The Hon'ble Minister from Uttar Pradesh observed that the Commissioner should not have unlimited power to extend the period of provisional assessment and that he could have the power to extend it by another year. Shri Ram Tirath, Member (OST), CBEC clarified that Commissioner's power was needed but would be exercised in very limited cases such as for turnkey projects where the final value of the project came to be known much later. The Hon'ble Minister from Tamil Nadu observed that the 'proper officer' for provisional assessment needed to be predefined and cross-empowerment would be required with the division of taxpayer base in order to have clarity as to which officer belonging to which administration (Centre or State) would do provisional assessment. The CCT, Telangana observed that Section 58 should be removed and it should be part of advance ruling. The Consultant, CBEC explained that the law left the choice to the taxpayer to use ....
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....stration would be informed. CCT Tamil Nadu observed that while audit would be limited to 5% of the taxpayers, the remaining taxpayers would be subject to scrutiny and both Central and State administrations could potentially give notice and then it would not be clear to whom the taxpayer had to send a reply. The Principal Secretary, Finance, Odisha stated that on account of such considerations, it was important to have a system where the taxpayer must know who was his officer. The Hon'ble Deputy Chief Minister of Gujarat observed that if the arrangement was that the one who gives notice first would handle all subsequent proceedings, then there could be a competition to issue notices which was not desirable. The Hon'ble Minister from Tamil Nadu emphasized that only Option II was workable for small taxpayers whereas the bigger taxpayers could face both the administrations. The Hon'ble Minister from Kerala suggested that the provisions like the present one, which had an implication for cross-empowerment, could be taken up later. The Council agreed with this suggestion. xii. Section 61 (Assessment of unregistered persons): The Hon'ble Minister from Haryana suggested to....
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..... The Consultant (GST), CBEC explained that the provisions were meant to avoid protracted litigation and help in quicker recovery of taxes. The Hon'ble Minister from Rajasthan stated that penalty should not be considered as a source of revenue, rather it should be used as deterrent. The Hon'ble Minister from Tamil Nadu suggested to retain the existing provision and cautioned that if there was too much distinction between penalty provisions, this could lead to undue discretionary power to the assessing officer. The Hon'ble Minister from Uttar Pradesh also supported the existing provision. The Council decided not to make any changes to the provision. xv. Section 67 (1) (Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any wilful misstatement or suppression of facts): The CCT, Telangana suggested to add the clause 'or tax arrived to the best of his judgement' in section 67 (1) to permit extrapolation of short levy where the tax payer was not furnishing the details. Shri Manish Kumar Sinha, Commissioner, GST Council explained that the settled legal position was that the tax de....
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....lained that the VAT officers had been authorised as land revenue authority under the Revenue . Recovery Act of the respective States. He observed that every State could make an authorization. After discussion, the Council agreed that the words 'any other officer authorized by the Government' shall be added in this Section. xviii. Section 79(2) (Power of inspection, search and seizure): The CCT, Andhra Pradesh suggested that in Section 79(2), a reference should also be made to Section 89 relating to detention and seizure of goods and conveyances in transit. The Commissioner, GST Council pointed out that Section 89 (3) had a reference to Section 79 (6). The Council decided not to make any changes to this provision. xix. Section 80 (Inspection of goods in movement): In respect of provision of inspection of goods in movement, there was a discussion regarding the desirability of keeping check posts at the borders. The Hon'ble Minister from Kerala observed that check post for other purposes like State Excise, Transport Department, etc. would continue and that for the tax administration, there should be an automated check post for capturing data of Inter-State movement of ....
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....t be kept at the border as this would lead to a vested interest in continuing with check posts. He added that common people looked at check posts as a source of corruption and delay and removal of check posts shall be the single most important gain of implementation of GST. The Hon'ble Chief Minister of Puducherry supported this view and stated that it was important to ensure free flow of goods. The Hon 'ble Deputy Chief Minister of Gujarat sounded a note of caution and stated that use of electronic way bills would depend upon creation of adequate infrastructure and doing away with check posts without adequate infrastructure would lead to loss of revenue. The Hon'ble Minister from Punjab observed that no check posts be maintained but there should be electronic collection of data at the borders. The Hon'ble Minister from Kerala suggested that a trade facilitation centre for collecting information electronically could be part of Excise or Transport check posts. The Hon'ble Minister from Karnataka observed that the concern expressed by the Hon'ble Minister from Kerala was addressed by the provision in the Model GST Law to carry devices like RFID, which would en....
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....rperson pointed out that where evasion of tax was Rs. 2 crore, the value of offending goods or services would be approximately Rs. 20 crore. The Hon'ble Minister from Assam suggested to keep the evasion threshold at Rs. 50 lakh, as in his State, quantum of evasion would not be very high. The Hon'ble Chairperson suggested that in order to make the arrest provision less prone to abuse, arrest could be made for duty evasion of Rs. 2 crore or more but the arrest made for the duty evasion ranging from Rs. 2 crore to Rs. 5 crore should be bailable and beyond Rs. 5 crore should be non-bailable. The Principal Secretary, Finance, Odisha pointed out that the power of arrest applied to all cases where input tax credit had been wrongly availed. The Hon'ble Chairperson observed that wherever there was a grey area relating to assessment, no arrest should be made. The Hon'ble Minister from Kerala observed that arrest was a form of harassment and that the trading community should not get frightened due to such a provision. The Hon'ble Minister from Bihar stated that there should be no sympathy for tax evaders and that like police, revenue officers should also have power to arre....
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....d by the Council'. The Council agreed to this suggestion. xxiii. Section 89(1)(a) (Detention and release of goods and conveyances in transit): The CCT Andhra Pradesh observed that this Section had no provision for issuing a detention order. The Hon'ble Chairperson observed that a provision could be added that while detaining a vehicle, a detention order shall be served on the owner or the driver of the vehicle. The Council agreed to this suggestion. xxiv. Section 89(1)(c) (Detention and release of goods and conveyances in transit): The CCT, Andhra Pradesh suggested that language of Section 89(1)(c) should be slightly modified to also provide for issuance of notice before imposition of penalty. The Council agreed to this suggestion. The CCT Andhra Pradesh further suggested that this provision should provide for release of goods after furnishing a security. The CCT Gujarat clarified that this provision already existed in Section 89 (3). xxv. Section 98(6) (Appeals to First Appellate Authority): The Hon'ble Minister from Punjab observed that under the Punjab VAT law, the prescribed amount of pre deposit was 25% of the amount of tax in dispute. He suggested that inste....
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.... reducing the limit for granting refund on the basis of self-certification (regarding no unjust enriehment) from Rs. five lakh to Rs. two lakh or such amount as the Council may decide. In all Sections where amounts are prescribed, an amendment be done by incorporating an additional expression 'or such amount as the Council may decide'. v. Section 48(3) (Refund of tax): To add another proviso to this Section granting power to the Council not to allow refund in certain cases even when there was an inverted duty structure. vi. Section 53(6) (Accounts and other records): To add the expression 'transporter' so that they are also made liable to maintain record of goods being transported by them. vii. Section 54 (Period of retention of accounts): To amend the Section by increasing the period of retention of records from five years to six years. viii. Section 56(1) (Collection of tax at source): To suitably clarify that only aggregators would be treated as electronic commerce operators and it would exclude those entities who sold their goods through their own electronic portal. ix. Section 56(4), 56(5)J 56(6), 56(7), 56(8) and 56(10) (Collection of tax at source):....
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.... of the GST Council was initially scheduled for 2 days, i.e. 11-12 December 2016. However, during the meeting on 11 December 2016, the Hon'ble Minister from West Bengal pointed out that the date of the festival of Eid Milad un-Nabi had been changed from 13 December 2016 to 12 December 2016. After discussion, the Council agreed to cancel the meeting scheduled for 12 December 2016. Further, after discussion, it was agreed that the next meeting of the Council would be held on 22-23 December 2016 in New Delhi. 9. The meeting ended with a vote of thanks to the Chair. (Arun Jaitley) Chairperson, GST Council ============= Document 1 JAYNA BOOK DEPOT Estd. 1949 JAYNA MINUTE BOOK ANNEXURE- List of Ministers who attended the 6th GST Council Meeting on 11 Dec 2016 S No State/Centre 1 Govt of India Shri Arun Jaitley 2 Govt of India Shri Santosh Kumar Gangwar Name of the Minister Charge Finance Minister Minister of State for Finance 3 Puducherry Shri V. Narayanasamy Chief Minister 4 Delhi Shri Manish Sisodia 5 Gujarat Shri Nitin Patel 6 Assam Dr. Himanta B. Sarma 7 Bihar 8 Chattisgarh 9 Haryana 11 12 10 Himachal Pradesh Jammu & Kashmir Karnataka ....
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....mber (GST), CBEC Principal Commissioner, (AR), CESTAT, CBEC Additional Secretary, Dept. of Revenue Principal Commissioner, Customs, Delhi, CBEC Advisor (GST), CBEC Joint Secretary (TRU), Dept. of Revenue Commissioner (GST), CBEC Joint Secretary, Dept. of Revenue Joint Secretary (TRU), Dept. of Revenue Commissioner, CBEC OSD to FM ADG, Press, Ministry of Finance Deputy Secretary, Dept. of Revenue Deputy Commissioner (GST), CBEC Assistant Commissioner (GST), CBEC Assistant Director (MRC) Additional Secretary Commissioner Commissioner Joint Commissioner Joint Commissioner Deputy Commissioner Assistant Commissioner Commissioner, Commercial Tax Additional Commissioner, Commercial Taxes OSD Commercial Taxes Secretary & Commissioner, Tax & Industry Superintendent, Taxes Commissioner, Tax 31 32 Assam CHAIRMAN'S INITIALS Shri Anurag Goel Page 20 of 22 MINUTE BOOK Name of the Officer Shri Arun Kumar Mishra Shri Khemraj Jhariya Shri R.K. Mishra Shri Anand Tiwari 47 Himachal Pradesh Shri Pushpendra Rajput Shri Ranjan Kumar Sinha Shri Sanjay Kumar Prasad Designation Additional Secretary, Commercial Taxes Assistant Commissioner Secretary, F....