TaxTMI 
TaxTMI 
Minutes of the 25th GST Council Meeting held on 18 January 2018
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....uncil of Notifications, Circulars and Orders issued by the Central Government 4. Decisions of the GST Implementation Committee (GIC) for information of the Council 5. Minutes of 4^th and 5^th Meeting of Group of Ministers (GoM) on IT Challenges in GST Implementation for information of the Council and discussion on GSTN issues 6. Recommendations of the 'Committee on Returns Filing' on Simplification of Returns under GST 7. Issues recommended by the Law Committee for consideration of the GST Council 8. Recommendations of the Committee on Handicrafts 9. Changes proposed to be made in the CGST Act, 2017, SGST Acts, the IGST Act, 2017 and the GST (Compensation to States) Act, 2017 10. Issues recommended by the Fitment Committee for the consideration of the GST Council i. Recommendations on Goods ii. Recommendations on Services 11. Carry forward items from the previous Council Meeting i. Presentation on GST in Real Estate sector ii. Incentivising Digital Payments in GST regime 12. Transfer of shares of Empowered Committee (EC) in GSTN to the State of Telangana 13.....
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.... 5. In view of the above, for agenda item 1, the Council decided to adopt the Minutes of the 24^th Meeting of the Council with the following change: 5.1. To replace the version of the Hon'ble Minister from Rajasthan in paragraph 6.13 of the Minutes with the following: 'The Hon'ble Minister from Rajasthan stated that they were a part of the pilot programme of e-Way Bill implementation starting from 20.12.2017 and that they were ready for inter and intra-State implementation from 1.2.2018 or 1.4.2018, on whatever date the Council decided. He supported the view of the Hon'ble Minister from Haryana as there should not be any distinction between the date of implementation of e-Way Bill for both inter and intra-State transactions.' Agenda item 2: Revenue collected in the month of November and December 2017 under Goods and Services Tax, including the revenue accruing to Centre and States through settlement of funds 6. The Secretary invited Shri Udai Singh Kumawat, Joint Secretary, Department of Revenue (DOR), to make a presentation on this Agenda item. 6.1. The Joint Secretary, DOR, made a presentation (attached as Annexure 3 of the Minutes). He informed that revenue collect....
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.... 6.3. The Hon'ble Minister from Punjab stated that his State had suffered a huge shortfall of revenue of about 45% in December, 2017 and requested Dr. Arvind Subramanian, Chief Economic Advisor, Ministry of Finance, to conduct a study as to why the tax revenue of Punjab had fallen so steeply which was not expected. The Secretary stated that earlier Punjab was getting revenue on the purchase tax for food grains exported to all other States, whereas now under GST, due to it being a destination-based tax, Punjab was getting revenue only to the extent of consumption by its citizens. 6.4. The Hon'ble Deputy Chief Minister of Bihar stated that an amount of Rs. 1,35,000 crore was lying in the IGST account, which had not been settled as yet. He suggested that this amount could be distributed among the States. The Secretary stated that there was a big gap of time between the point of production of goods and the point of sale and that the revenue would accrue to both the Central Government and the State Governments when goods were actually sold in the market. Until then, IGST would remain accumulated and expressed hope that after three months, revenue would pick up with goods being actu....
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.... between the Centre and the States and from the States' share, it could be distributed as a provisional settlement to different States based on their share of collection of taxes subsequently subsumed under GST during the base year 2015-16. He added that necessary changes in rules could be made for this. The Hon'ble Deputy Chief Minister of Bihar supported this suggestion. The Council agreed to this suggestion. 6.6. The Hon'ble Minister from Kerala stated that the data presented showed that percentage of return filing had gone down and the projection of revenue for December 2017 was based on low return filing. He stated that the other question was regarding other forms of leakage of revenue. He observed that the consumer States were lagging in revenue collection and their settlement from IGST should have been higher. He added that presently, the figures of tax from SGST and IGST settlement were almost the same, whereas due to the destination principle, higher taxes should have accrued to the consumer States through lGST settlement. He added that if the SGST collection is ‘x’, then IGST settlement should be around '2x' for the consumer States like Kerala. He observed that thi....
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....ng arrears under the VAT regime to the tune of Rs. 100 crore per month and this should get deducted while calculating compensation amount. He suggested that in the information sheet circulated by the Department of Revenue on compensation, a column should be added to indicate the amount of tax recovered from the earlier VAT period in order to get an idea as to how arrears collection was progressing across the States. He also suggested that compensation should be paid every month. Joint Secretary, DOR, pointed out that the provision of bi-monthly compensation was part of the law. The Secretary' supported the first suggestion of the Principal Secretary (Revenue) and stated that the compensation figures sent to the States should also have a column indicating the amount of arrears of VAT collected during the relevant months. The Council agreed to this suggestion. The Secretary added that it was important for the State Government officers to also focus their attention on recovery of arrears of revenue. 7. For agenda item 2, the Council took note of the GST revenue analysis for the months of November and December, 2017. Furthermore, the Council approved the following: i. Out o....
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....nexure 4 of the Minutes) and it was placed before the Council for information. The Council took note of the decisions of the GIC. 12. For Agenda item 4, the Council took note of the decisions of the GIC. Agenda item 5: Minutes of 4^th and 5^th Meeting of Group of Ministers (GoM) on IT Challenges in GST Implementation for information of the Council and discussion on GSTN issues 13. The Secretary invited the Hon'ble Deputy Chief Minister of Bihar, the Convenor of the Group of Ministers (GoM) on IT Challenges in GST Implementation to brief the Council regarding the deliberations of GoM. The Hon'ble Deputy Chief Minister of Bihar stated that the GoM had held a meeting on 17 January, 2018 and the review showed that overall, there was a good progress and that lnfosys was performing well. There were much fewer complaints regarding the network and the system. He further stated that NIC made a presentation on e-Way Bill system and they suggested to delay implementation of intra-State e- Way Bill system by another 15 days to a month so that taxpayers/transporters get a chance to first work on the inter-State e-Way bill system and then proceed to intra-State e-Way bill system. During....
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....ment stage and 15% from enrolment stage. He stated that GSTR-3B filing for the month of July, 2017 (till 14 January, 2018) was 92% and some taxpayers were still filing GSTR-3B for July, 2017. He further stated that GSTR-3B filing was 87% for August, 2017; 83.51% for September, 2017; 78.99% for October, 2017 and 72.18% for November, 2017. The periods for which late fee waiver was given, the filing continued even after 6 months. The GSTR-4 filing by composition dealers was 66.74% of the registered taxpayers during the first quarter and 3.26 lakh GSTR-4 returns had been filed for the second quarter. He informed that GSTR-1 filing was 80% for July, 2017, 57% for August, 2017, 62% for September, 2017; 47% for October, 2017 and 40% for November, 2017. He observed that the total percentile was quite low and this needed to go up. 13.2. On e-Way bill system, he stated that the system software had been operational since September, 2017 in Karnataka and they were issuing about 1.2 lakh e-Way bills every day. He informed that 32 States and UTs were working on e-Way bill system after it was opened to all the States/UTs and the trial period was till the month-end. He informed that all modes o....
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....ere appeared no case for increasing the annual turnover threshold for composition dealers to Rs. 2 crore in the law. The ACS, Uttar Pradesh, stated that their margin also appeared to be as high as 30% and it appeared that they were under-reporting their turnover. He stated that there was also a case for upward revision of the rate of composition tax. 13.4. The CEO, GSTN, further stated that an analysis of GSTR-38 returns indicated that 80% GSTR-38 filers filed consistent returns in all five months (July to November 2017). A comparison of GSTR-1 and GSTR-38 indicated that about 10.96 lakh filers did not file the GSTR-1 returns and the Tax Administration would need to examine why they did not file returns. He further stated that around 485 of big taxpayers i.e. those with an annual turnover of more than Rs. 100 crore, had filed only one return and rest of the returns were either Nil or of very low amount. He stated that this number was constantly increasing from July (164) to November (485) and their number showed that they were getting emboldened not to pay tax. He stated that these details would be shared with tax authorities for further follow up. He added that about 4.5 lakh t....
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....at keeping in view the criticism regarding the present procedure of return filing, which involved filing 37 returns in a year, the Committee, after discussing the issue with the officers of the Law Committee, had recommended that instead of three returns in a month, only one return could be filed. On the basis of the uploaded invoices of the seller, input tax credit could be made available. He added that the switch over should not be abrupt; rather, there should be a transition plan to get into invoice based input tax credit system. He then invited the CEO, GSTN, to make a presentation on the recommendations of the Committee on Return Filing. 14.1. The CEO, GSTN, in his presentation (attached as Annexure 7 of the Minutes), stated that the stakeholders had reported several challenges with regard to the present system of return filing like filing of three returns in a month, returns being inter-linked and thus in case one return was missed, no further return could be filed. He added that tax rate-wise entries being made in GSTR-1 doubled the work of taxpayers - one while creating GSTR-1 and the other during comparing with GSTR-2A. Linking of credit note and debit note with invoice....
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....ion was to file only one return per period and suggested two options to achieve this. Option 1 could be the workflow driven in which provisional credit could be taken on the basis of seller's data plus buyer declared additional purchase details at invoice level. Under Option I, up to a particular date, say 10^th of the month, the buyer could accept the invoices and lock it. Any invoices uploaded beyond that date would go to the next month. The system would draft returns on the 11^th of the month. The purchaser could add the missing purchase invoices not uploaded by sellers. He stated that Option I feature would be any time uploading of data, offline tools for matching, no interest from the buyer for the initial two-month period as the seller would be paying the interest when he added the missing invoices to his GSTR-1. He stated that where supplier did not accept an uploaded invoice, there should be a separate provision in law to address this. The Committee recommended it to be one monthly return for all. Option II could be simultaneous uploading of sale and purchase data with system matching. Under this Option, buyer-declared input tax credit could be availed by filing purchase de....
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....ted tax liability by uploading the invoices on the portal. This would mean either denial or automatic reversal of credit on unmatched invoices. He stated that this principle was even more important in GST regime because settlement of IGST became a lot more complex and harder to audit where transactions would have to be settled possibly at invoice level. He stated that without matching of invoices, benefit of other related initiatives like e-Way bill system would be diluted. He stated that those models were doomed to fail which increased the burden on the taxpayer to correct mismatches or which relied on tax official's intervention to reduce the mismatches. He added that any solution that permitted, in the first place, higher level of mismatch would also fail as it would not permit automatic reversal. 14.6. Shri Nilekani further stated that the biggest risk of having a mechanism in which the system would do the matching was like taking the monkey on one's back. He added that it was not desirable to entrust the responsibility of invoice matching to the Government. He stated that a high rate of mismatch of 30% to 40% would provide sufficient cover to fraudsters to easily split the ....
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....mely, invoice item level right from day one and that it should not be rolled up at tax rate or commodity level. Upload should happen on a continuous basis, which would imply that verification and acceptance coincided with the actual business transaction. Invoices uploaded after the 10^th of the month would automatically be included in the next return. He stated that market forces would evolve a model where invoice would be paid for only after upload on the GST system. Buyer should accept supplier's invoices on the GST system, which would automatically determine the input tax credit. He stated that the key contrasts from GSTR-2 and pure system matching model was that it was simply an invoice "acceptance" and not "filing" of return and that acceptance could happen on continuous basis, not waiting for all GSTR-1 to be filed. Invoices, once accepted, would be locked and could not be modified by the supplier, thus bringing finality to the transaction. The system should provide robust tools to facilitate smooth acceptance including for offline matching of supplier invoices with purchase books, auto-acceptance capabilities and improved support to GSPs/ASPs for tighter integration with acc....
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.... capability. He emphasised that this system would work well as it was incentive aligned where, if the supplier did not report invoices on time, he would not get paid and the buyer who did not accept invoices in time, would not get input tax credit. 14.10. The Secretary observed that the presentation of Shri Nandan Nilekani suggested matching responsibility to be entrusted to the buyer and the seller which made the job simpler. The other option was to make everyone report his sale and purchase invoices and then computer would generate mismatches. He expressed that it could take months to rectify the mismatches. For mismatched invoices, either the tax administration would need to go after the buyer and the seller or there would be auto-reversal of input tax credit which would be a big pain point for the taxpayers. He observed that in the initial period, one would continue with GSTR-3B; upload sales invoices and have a separate missed invoices table for filling up the details by the buyer and the input tax credit claim in GSTR-3B should be roughly matching with his declaration. However, it should only be informational. The percentage of mismatch should be observed over a period of ....
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....n the model proposed by Shri Nandan Nilekani (i.e. revised version of Model B), once an invoice was uploaded by the supplier and accepted by the buyer, the buyer would get credit automatically. However, the structure on which GST has been designed has two elements: (i) the seller uploads the invoices; (ii) the payment of tax against the invoice should have been made. If the proposed model was accepted, where the buyer would get credit on the basis of invoice uploaded by the seller without ascertaining payment of tax against the invoice, this would create a huge problem in IGST transfer as funds might be transferred from the State of the supplier to the State of the recipient, whereas the supplier might not have paid the tax. This would lead to a situation of tax administration of one State running after the defaulting suppliers located in another State which would be very difficult. 14.12.2. He further stated that under Model A of Option 11, input tax credit was being made available provisionally on the basis of missing invoices uploaded by the buyer subject to its acceptance later by the seller. He stated that this model could be acceptable to trade and chartered accountants, b....
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.... matching them between the buyer and the seller and not the system. The Hon'ble Chairperson stated that the concern of the Hon'ble Deputy Chief Minister of Delhi regarding hue and cry being raised by small traders would also need to be considered. The Hon'ble Minister from Jammu & Kashmir stated that today, there was a genuine compliance complaint, which needed to be redressed through a revised procedure. The Hon'ble Deputy Chief Minister of Delhi stated that the model proposed by Shri Nandan Nilekani appeared to be good. The Hon'ble Deputy Chief Minister of Bihar stated that the burden of tax consultants would increase as they would need to upload both purchase details along with sale details and would also need to resolve mismatches. Shri Nandan Nilekani observed that money would be a big stake for the buyer and the seller. In the proposed model, no return was being filed and only invoices were being uploaded, which was not a big burden. He stated that there should not be undue concern regarding the reaction of the tax professionals. 14.15. The Principal Secretary (Finance), Odisha, stated that the fact that accounts department of the taxpayer would need to check the invoices ....
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....axpayer sold goods to a small taxpayer and did not upload his invoice for 2-3 months, it could badly hit the business of the small taxpayer. He further stated that purchasers/small taxpayers should be given an option to give additional information to Government on buying so as to get the benefit of input tax credit. He added that where both buyer and seller were colluding and did not pay tax, the return should be linked with e-Way bill system. He also raised an issue that if a registered taxpayer purchased from an unregistered taxpayer without payment of tax under reverse charge mechanism, he was under no compulsion to upload the invoice, and then how information would come regarding purchases from unregistered taxpayers. Therefore, in case of purchases from unregistered dealers also, there should be a provision of uploading the invoice by the buyer. The Secretary observed that the last phase of the return filing would not be implemented right from the beginning. At the initial stage, small taxpayers would take self-declared input tax credit of the entire amount. Simultaneously, the gap in terms of number of missing invoices would need to be narrowed. The provision of denial of inp....
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....He stated that Option II was better as it would have data of both the seller and the buyer and one would come to know as to who was the culprit for the missing invoices. In Option II, there would be no scope for the purchaser to reach a dead-end and matches could increase over a period of time. He observed that both Option I and the Option proposed by Shri Nandan Nilekani carried the risk of the purchaser reaching a dead-end. He added that no tax administration had tried Option I or the new model proposed by Shri Nandan Nilekani whereas Option II had been in use by a few State administrations. He suggested that this Option should be used along with direct auto-reversal. The Secretary observed that no new demand was being made in the model proposed by Shri Nandan Nilekani whereas burden on taxpayer was getting reduced. In this model, self-credit could be taken by the purchaser without disturbing GSTR-3B and the purchaser would only give details of missing invoices instead of furnishing his entire purchase invoices. Through this method, tax information would come and could be used by the tax administration for various purposes including for enforcement. He suggested not to apply auto....
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.... Option ll and suggested that one should not take a hasty decision. He added that another week's time be taken to decide the issue and then take a decision during a Council's meeting through video conference. The Hon'ble Minister from Andhra Pradesh also suggested to give more time to decide on the options. The Hon'ble Minister from Telangana suggested that the options should be discussed with the stakeholders before coming to a final decision. The Hon'ble Chairperson stated that the issue should be discussed with the stakeholders after the Committee on Return Filing and the Law Committee had further examined the suggestions of Shri Nandan Nilekani and thereafter the issue could be decided by the Council through video conference. The Hon'ble Minister from Jammu & Kashmir stated that the proposal should not be condemned by putting it before the officers ' committee for consideration as they had already made up their mind that the proposal of Shri Nandan Nilekani was not workable. He suggested that a small Group of Ministers could examine this proposal. He further stated that intuitively, it seemed to be a good model. The Hon'ble Chairperson stated that the model proposed by Shri Nan....
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....and deliberations in the sub-committees. She stated that inputs had been received from various States for including items as handicrafts and after the completion of the report, further suggestions had been received from the States of Odisha and Gujarat. She stated that these would also be considered by the Committee on Handicrafts and that the goods which were agreed to be considered as handicrafts would be referred to the Fitment Committee for recommending rate of tax on them. She then invited Shri G.D. Lohani, OSD, TRU-1, CBEC, to make a brief presentation on the report of the Committee on Handicrafts. 18.1. The OSD, TRU-1 in his presentation (attached as Annexure 9 of the minutes) stated that in respect of TOR (Terms of Reference) 1, relating to definition of handicrafts, the Committee took note of definition of handicrafts by UNESCO and other national and international bodies and the observations of the Hon'ble Supreme Court on handicrafts and concluded that any definition of handicrafts must have three elements, namely, predominant use of hands; sufficient artistic and traditional elements; and distinct output from machine made goods. He stated that after several iterations....
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....C, clarified that items made of bamboo were already covered in the list and classifiable under Chapters 44, 46 and 96 (recommended rate of tax for Chapter 46 is already 5%). As regards sarees and clothes, he stated that the Committee deliberated on this issue and decided not to treat them as handicrafts. He stated that the Office of the Development Commissioner also did not recommend to treat these goods as handicrafts and as such sarees etc. from none of the States had been taken in the list of handicrafts. 18.5. The Hon'ble Minister from Jammu & Kashmir stated that first, handicrafts should be defined and then rate on handicrafts items could be looked at separately. The Hon'ble Chairperson observed that different States had different kinds of handicrafts and they were mostly out of the tax net till now. He added that this sector generated mass employment and, therefore, rate of tax on handicrafts should not be very high. He further stated that pending fitment decision on these items, the Committee could look into the issues relating to handmade carpets. The Chairman, CBEC suggested that the Council could accept the report of the Handicrafts Committee and then the issue of rate....
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....mmittee were discussed in the meeting of the officers of the Central and the State Governments on 11 January 2018 and the consolidated recommendations of the officers meeting of 11 January 2018 was placed before the Council for consideration. The Secretary invited Commissioner (GST Policy), CBEC to brief the Council about the important recommendations under this agenda item. The Commissioner (GST Policy), CBEC stated that what was placed before the Council for approval was only the broad proposals contained in the second last column of the Annexure I of Agenda Item 9 (hereinafter referred in this section as Annexure I) and the suggested formulation contained in the last column would undergo substantial modification based on consultation with the Law Committee and the Union Ministry of Law. He stated that one change was envisaged in the proposal contained in Sl. No. 11 of Annexure 1, namely, to replace the expression "employees without charging a consideration" with the expression "Employees with or without charging a consideration". He further stated that some new proposals were added which were not discussed in the Officers' meeting held on 11 January, 2018. The first one was the ....
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....the annual turnover threshold for composition would be raised to Rs. 1.5 crore and that the same limit should be kept in the Law. The Hon'ble Deputy Chief Minister of Delhi stated that the original discussion was in regard to schemes relating to small scale industries and SMEs but then the discussion went on to composition scheme. The Hon'ble Chairperson stated that the results of relaxation under the composition scheme was not very encouraging, and in this view, it was not desirable to increase the annual turnover threshold for composition to Rs. 2 crore and it should be limited to Rs. 1.5 crore. The Council agreed to this suggestion. 20.2. The Commissioner (GST Policy), CBEC, stated that another proposal was to permit supply of services by a composition dealer up to 10% of the total turnover or Rs. 5 lakh whichever was higher with the condition that the taxes on the services would be little higher. This would include supplies by way of job work. For these services, a composition rate could be notified by the government on the recommendations of the Council but not exceeding a total rate of 18% (9% each for CGST and SGST). ln addition, restaurant service was proposed to be defi....
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....x on accommodation services. The Hon'ble Minister from Goa supported the proposal of the Hon'ble Minister from Kerala and stated that it was ironical that when they raised the same issue of business moving out of India because of high rate of tax of 28% on such services, then no heed was being paid and now the same argument was being offered for place of supply related provision. The Hon'ble Minister from Haryana stated that another reason for tom business moving out of the country was that the Indian tour operators were getting VAT refunds from those countries on official business conducted abroad. The Hon'ble Chairperson suggested that both the place of supply provision and the rate of tax on hotels, etc., should be discussed together and a proposal be brought before the Council. The Council agreed to this proposal. vi) S.No.47 of Annexure I: Compensation Cess: The Commissioner, (GST Policy), CBEC stated that it was proposed to insert an enabling provision in the GST Compensation Act to provide for levy of cess at the manufacturing stage on parameters such as production capacity for certain categories of supplies such as pan masala and other evasion prone commodities. The Hon'....
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.... Cess on medium and large cars and SUVs, on the margin of the supplier of such motor vehicles. He added that these rates would apply on supply of used motor vehicles by a person who had not availed input tax credit on such motor vehicles. He further added that for a registered entity, value for tax purpose shall be the difference between the sale value and the depreciated value of the motor vehicle. 21.2. After discussion, the Council agreed to the tax proposal of the Fitment Committee in respect of used motor vehicles, contained at Serial No.9 of Annexure 1 of this Agenda item. Serial No.10 of Annexure 1: Diamonds of all type (Precious stones) (HSN Codes 7102, 7103) 21.3. The Hon'ble Minister from Kerala raised an issue as to why tax on diamonds, other than rough diamonds and including cut and polished diamonds was proposed to be reduced from 3% to 0.25%. He pointed out that tax on exported diamonds was fully refundable and if there was delay in granting refund, it should be addressed through appropriate administrative mechanism. He observed that there was no rationale to reduce tax on diamonds as it was a luxury product. The Secretary stated that the diamond industry had....
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...., CBEC, stated that all items of bamboo cane, rattan, etc. of the entire Chapter were kept at 5% tax rate and it would be desirable to retain these products also at the rate of 5%. 21.7. The Hon'ble Minister from Odisha reiterated that there should be a carve out for plates made of sal and siali leaves, and ropes made of sabai grass, and that this could be taken up by the Fitment Committee in its next meeting. The Council agreed to this suggestion. Serial No.21 of Annexure 1: Parts and accessories specifically used for manufacture of hearing aids (Any chapter) 21.8. The Joint Secretary (TRU-I), CBEC, stated that the Fitment Committee had given two options for consideration of the Council, namely, either to provide an end-use based exemption for parts and accessories specifically used for manufacture of hearing aids or to impose a nominal 5% GST on hearing aids so that the domestic manufacturers were not at disadvantage vis-a-vis imports. The Secretary suggested that the end-use based exemption might be more desirable. 21.9. The Council agreed to exempt parts and accessories specifically used for manufacture of hearing aids through end-use based exemption. Serial No.22 of A....
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....e Carpets 21.12 The Hon'ble Minister from Jammu & Kashmir stated that he was requesting for the fourth time in the Council to reduce the rate of tax on handmade carpets from 12% to 5%. He informed that before carpets were sold, they were supplied to other States and at that stage, carpets were being taxed at the rate of 12%. The Hon'ble Chairperson suggested that this could be discussed by the Fitment Committee. The Council agreed to this suggestion. The Hon'ble Minister from Haryana stated that the State of Jammu & Kashmir deserved a special consideration in respect of the rate of tax on handmade carpets. The Secretary stated that the problem was regarding upfront payment of tax on handmade carpets and suggested that the Committee on Handicrafts could examine this issue and suggest a solution. The Council agreed to this suggestion. Agenda item 10(i): Discussion on Annexure II Serial No.6 of Annexure ll: Pickle (HS Code: 2106) 22. The ACS, Tamil Nadu, stated that pickles should be exempted from tax. He stated that the Fitment Committee had not reached a consensus for reduction in the rate of tax on pickles from 12% to 5%. The Joint Secretary (TRU-1), CBEC, stated that g....
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....uits at 12%. The Joint Secretary (TRU-1), CBEC, stated that biscuits were in organised sector and had a market of about Rs. 36,000 crore. Half of this market constituted low priced biscuits and the other half constituted high energy biscuits. He stated that reducing the rate of tax on biscuits from 18% to 12% would lead to substantial loss of revenue. Serial No.74 of Annexure II: Materials used by disabled persons 22.5. The Hon'ble Minister from Kerala stated that spare parts for cochlear implants were being taxed at the rate of 28% and suggested that this rate should be reduced. The Joint Secretary (TRU-I), CBEC, stated that only batteries for cochlear implants would be taxable at the rate of 28%. Shri Mansur M.I., Assistant Commissioner (Commercial Tax), Kerala, informed that some cables, parts and accessories of cochlear implants needed to be replaced periodically and these were presently taxable at the rate of 28%. The Hon'ble Minister from Kerala suggested that the rate of tax on spare parts of cochlear implants should be reexamined by the Fitment Committee. The Council agreed to this suggestion. 22.6. For Serial No.74 of Annexure II, the Council agreed to the recomme....
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....ne the problem of upfront payment of tax on handmade carpets from Kashmir, when sent to various States for eventual sale. 23.1. For Annexure II of Agenda item 10(i), the Council approved the recommendations of the Fitment Committee and also directed it to re-examine the following: i The rate of tax on fishing line and lead weight (Serial No.28 and Serial No.63 of Annexure II); ii The rate of tax on spare parts of cochlear implants (Serial No.74 of Annexure II); and iii The classification and rate of tax on cotton eco-friendly sanitary napkins (Serial No. 95 of Annexure II). Agenda item 10(ii): Recommendations on Services General discussion relating to Hotels 24. The Hon'ble Minister from Kerala stated that the tax rate on hotels in most countries was low, like 6% in Singapore and China, 7% in Thailand and Malaysia, 10% in France and 15% in Sri Lanka and USA. However, India had a very high rate of tax of 28%. He observed that bulk of the conferences were moving away to South East Asian countries. He suggested that there should be some rationalisation of rate of tax on room rents in hotels to make it competitive vis-a-vis other countries. The Ho....
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.... also be exempted. The agencies of the State Government of Haryana like HSIIDC (Haryana State lndustrial Infrastructural Development Corporation) and Pollution Control Board (PCB) have such contracts in place. The Joint Secretary (TRU-IT), CBEC, explained that the part of profit petroleum given to the Central Government by the contractor was not allowed to be recovered as cost of production under the production sharing contract and thus it may not to be subject to tax. The Hon'ble Minister from Haryana stated that five States, which collected licence fee on liquor for human consumption needed to be exempted from tax as was suggested during the earlier meetings of the Council but till now, no notification had been issued to this effect. The Secretary stated that it was agreed during the earlier meeting that in future, there would be change in the revenue model under which more tax would be charged. He stated that for past cases, some way needed to be found out, may be in the form of exemption. The Hon'ble Minister from Haryana stated that on this issue, several representations had been sent but no solution had been found as yet. The Secretary stated that this issue would be discusse....
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....d not presently have any equity shares in GSTN. The Council agreed to this proposal. 30. For Agenda item 12, the Council approved to transfer 80,000 shares of Rs. 10 each of the Empowered Committee of the State Finance Ministers to the State of Telangana. Agenda item 13: Any other agenda item with the permission of the Chairperson Agenda item 13(i): Proposal to declare the sale of goods in Customs bonded warehouse and goods sold as high sea sales as 'no supply' under Schedule III of the CGST Act, 2017 31. Introducing this Agenda item, the Secretary stated that this agenda item was to alleviate the difficulty of double taxation. He explained that sales within a Customs bonded warehouse attracted IGST and when goods were cleared from the Customs bonded warehouse, they were again charged to IGST. In order to alleviate this problem of double taxation, it was proposed to amend the valuation provisions of the imported goods for the purposes of payment of integrated tax by amending the Customs Tariff Act. The amendment would result in integrated tax being levied on the enhanced sale value or the last sale value in case of multiple sales or value determined under Section 3(8) o....
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....n this Agenda item, the Hon'ble Minister from Kerala stated that imposing penalty for not carrying e-Way bill was a deterrent measure and a penalty of Rs. 500 would not be a sufficient deterrent. Shri V.P. Singh, CCT, Punjab, stated that in their experience, invoice was often destroyed after the goods reached the destination, and therefore, in case penalty was very small, there would be a perverse incentive to pay a penalty of Rs. 1,000 and carry on the evasion activities. The Secretary stated that this proposal was only for the initial period and that there was a risk that too high a penalty might cause obstruction to smooth transportation of goods. 33.2. Shri Jagdish Chander Shanna, Principal Secretary (E&T), Himachal Pradesh, stated that in his State, e-Way bill system was already in place and e-Way bill declarations were being filed and penalty for not carrying e-Way bills was 50% of the value of goods. The Hon'ble Minister from Kerala stated that in his State, penalty for not carrying e-Way bills was twice the amount of tax involved. The CCT, Punjab, stated that instead of reducing the penalty amount, some other mechanism could be considered like not imposing penalty on fir....
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.... suggested that for inter-State movement of goods, penalty for not carrying e-Way bill should be 100% of the tax amount and for intra State movement, discretion for imposing penalty should be left to the State concerned. The Secretary stated that from 1 February, 2018, e-Way bill system would compulsorily be introduced for inter-State movement of goods and 15 States had opted to introduce the e-Way bill system for intra-State movement of goods and that for other States, the last date was 1 June, 2018. The Hon'ble Deputy Chief Minister of Delhi stated that it would not be practical for them to put check posts for intra-State movement of goods. The Secretary stated there already existed a clause for relaxing the requirement of e-Way bill for intra-State movement of goods through a Committee of officers of State and Central Government. 33.5. The Hon'ble Minister from Kerala again raised a question regarding the issue of penalty for violation fore-Way bill rules. The Secretary stated that the general suggestion was either to keep the penalty same or keep it somewhere around Rs. 3000-Rs. 4000. The Hon'ble Minister from Kerala stated that there was no justification to reduce penalty. ....
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....at Section 129 had precedence over other Sections and power to waive off penalty under Section 128 should also have a reference to Section 129 of the CGST Act, 2017. The CCT, Punjab, stated that Section 129 of the CGST Act was attracted only where evasion of tax was involved. The Secretary suggested that for intra-State movement of goods, an understanding could be reached not to impose any penalty during the first month of implementation of the e-Way bill system and this could be treated as a trial period. The Hon'ble Minister from Jammu & Kashmir stated that the validity period of e-Way bill for remote areas, like Ladakh, should be more as vehicles could be stranded for 5-6 days due to natural causes. He stated that there should be an enabling provision to increase the validity period of e-Way bill in such remote areas. The Commissioner (GST Policy), CBEC, stated that such a provision already existed under the second proviso of rule 138(10) of the CGST Rules, 2017. 33.7. The Hon'ble Minister from Kerala strongly raised the question as to why gold should be exempted from e-Way bill system. He stated that law and order was a State subject and they could take care of public securi....
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.... the penalty could be waived off during the first month. The Hon'ble Minister from Haryana stated that a lot of stock of goods had piled up and there was a risk of tax evasion. He stated that there could be pressure for deferment of e-Way Bill but he suggested that intra-State and inter-State e-Way bill systems should be started simultaneously if NIC was ready for the same. He stated that initially, one could take a lenient view with regard to implementation of e-Way bill system. The Secretary stated that this was a reasonable suggestion and that the 15 States, which were starting implementation of intra-State e-Way bill system for movement of goods from 1 February, 2018 (along with inter- State movement of goods) would need to go slow with regard to imposition of penalty. The Hon'ble Deputy Chief Minister of Bihar stated that guidelines should be worked out to avoid any clash between the Central and the State Governments in the enforcement of the e-Way bill system and for better coordination. The Secretary stated that in the Officer's meeting, it had been conveyed that for any enforcement action in regard to e-Way bill, the two administrations should work out joint action plan and....
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....f Customs under Section 3(1) of the Customs Tariff Act, 1975, such as Clean Environment Cess, was also being claimed as transitional credit as the law did not specifically exclude them from the list of eligible duties. He stated that to remove any ambiguity and to prevent credit of Cess to be transitioned under Section 140 of the CGST Act, 2017, it was proposed that credit of Cesses could be specifically excluded from the list of 'eligible duties' under Explanations 1 and 2 of Section 140 of the CGST Act, 20 17. He stated that accordingly, it was proposed to amend the following provisions of Section 140 of the CGST Act, 2017: i. Sub-section (1) of Section 140 to provide that only credit of eligible duties can be transitioned; 11. ii. Explanations 1 and 2 of Section 140 to include reference to sub-section (i) of Section 140; ii. Insert an Explanation 3 to Section 140 of CGST Act, 2017 to clarify that the expression "eligible duties and taxes" does not include any Cess which has not been specified in Explanation 1 or Explanation 2 above and any Cess which is collected as Additional Duty of Customs under sub-section (1) of Section 3 of the Customs Tariff Act....
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....ump sets. He also suggested reduction in the rate of tax on aluminium utensils from 12% to 5%, on aluminium raw material such as aluminium circles and sheets from 18% to 12% and on aluminium scrap from 18% to 12%. He noted that aluminium utensils were used by lower and middle-class houses and aluminium utensils were mostly recycled. 39.1. The Hon'ble Minister from Kerala circulated a written speech during the meeting of the Council wherein he highlighted certain issues of concern. He suggested that the IGST amount should be distributed provisionally among States on the basis of the proportion of the (IGST fund already transferred till now. He expressed reservation regarding Centre's request to reduce the rate of tax on diesel and instead suggested that the Centre should bring down the recent duty hike subsequent to reduction in crude price in proportion to the price increase. He expressed concern regarding slow pace of notification of procedures and methodology and guidelines on determining what constitutes anti-profiteering by the National Anti-Profiteering Authority. He suggested that the Council should take measures to discuss issues relating to passing on the benefit of duty....
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....a Shri Shashi Bhusan Behera Shri V. Narayanaswamy Shri Manpreet Singh Badal Shri Rao Rajendra Singh Shri D. Jayakumar Finance Minister Finance Minister Chief Minister Finance Minister Deputy Speaker Minister for Fisheries and Personnel & Administrative Reforms Finance Minister 24 25 Telangana Uttar Pradesh Shri Etela Rajender Shri Rajesh Agarwal Finance Minister 26 Uttarakhand Shri Prakash Pant Finance Minister Page 37 of 104 CHAIRMAN'S INITIALS CHAIRMAN'S INITIALS MINUTE BOOK Annexure 2 List of Officials who attended the 25th GST Council Meeting on 18 January, 2018 Name of the Officer Sl No State/Centre 1 Govt. of India Dr. Hasmukh Adhia 2 Govt. of India Dr. Arvind Subramanian 3 Govt. of India Ms Vanaja N. Sarna 4 Govt. of India Shri Mahender Singh 5 Govt. of India Dr. John Joseph 6 GST Council Shri Arun Goyal 7 Govt. of India 8 Govt. of India Shri Vinay Chhabra 9 Govt. of India 10 Govt. of India 11 Govt. of India 12 Govt. of India 13 Govt. of India 14 Govt. of India 15 Govt. of India 16 Govt. of India 17 Govt. of India 18 Govt. of India 19 Govt. of India 20 Govt. of India Shri P.K. Mohanty Shri M. Vinod Kuma....
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....astogi Shri Rajesh Kumar Agarwal Shri G.S. Sinha Shri Jagmohan Shri Rahul Raja Shri Mahesh Kumar Shri Rakesh Agarwal Shri Sandeep Bhutani Shri Shekhar P. Khansili Shri Vipul Sharma Shri Sunil Kumar Shri Amit Soni Shri Anis Alam Shri Dipendra Kumar Singh Shri Nandan Nilekani Shri Venkat Narayan S Dr. A B Pandey Shri Prakash Kumar Shri Nitin Mishra Ms Kajal Singh Shri Jagmal Singh OSD to Union Finance Minister PS to MoS OSD to MoS (Finance) OSD to Finance Secretary OSD to Chairman, CBEC OSD to Chairman, CBEC Joint Secretary Joint Secretary Addl. Commissioner Joint Commissioner Joint Commissioner Under Secretary Under Secretary Under Secretary Superintendent Superintendent Superintendent Inspector Inspector Inspector Inspector Board Member Chairman AVP CEO EVP (Technology) EVP (Services) VP (Services) Commissioner, Chandigarh Commissioner, Nagpur 60 Infosys 61 Infosys 62 GSTN 63 GSTN 64 GSTN 65 GSTN 66 GSTN Govt of India, 67 Shri Kishori Lal CBEC, (Zones) Govt of India, 68 Shri Ashish Chandan CBEC, (Zones) Govt of India, 69 Shri Pradeep Kumar Goel Commissioner, Meerut CBEC, (Zones) Govt of India, 70 Shri Neerav K....
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....OT MINUTE BOOK std. 1949 JAYNA 103 Delhi 104 Delhi 105 Delhi 106 Goa 107 Gujarat 108 Gujarat 109 Gujarat 110 Haryana 111 Haryana 112 Haryana Daman &Diu 102 and Dadra Shri Sajjan Singh Yadav &Nagar Haveli Shri H. Rajesh Prasad Shri Anand Kumar Tiwari Shri M. T. Kom Shri Dipak Bandekar Dr. P.D. Vaghela Shri. Sanjeev Kumar Shri V.K. Advani Shri Sanjeev Kaushal Smt. Ashima Brar Shri Vijay Kumar Singh Advisor to Administrator Commissioner, State Tax Addl. Commissioner, GST Addl. Commissioner Commissioner, CT Commissioner of State Taxes Secretary (Economic Affairs) Finance Department OSD (GST) Addl. Chief Secretary E&T Commissioner 113 Haryana Shri Rajeev Chaudhary Addl. E&T Commissioner Jt. Excise & Commissioner Taxation Himachal 114 Pradesh Himachal 115 Shri R. Selvam Pradesh Himachal 116 Shri Sanjay Bhardwaj Shri Jagdish Chander Sharma Principal Secretary (E&T) Commissioner of State Tax and Excise Additional Commissioner Grade-1 Pradesh Himachal 117 Shri Rakesh Sharma Joint Commissioner Pradesh 118 119 Jammu Kashmir Jammu Kashmir & Shri P. I. Khateeb & Shri P.K. Bhat 120 Jharkhand 121 Jharkhand 122 Jharkhan....
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.... Registration Dept. Jt. Commissioner, CT Principal Secretary (Revenue) Commissioner (CT) Add. Commissioner (CT) Chief Resident Commissioner Addl. Chief Secretary Commissioner, CT Addl. Commissioner, CT Joint Secretary Commissioner, State Tax & Additional Commissioner of State Tax Commissioner, CT Senior Joint Commissioner Page 42 of 104 JAYNA BOOK DEPOT MINUTE BOOK atd. 1949 Annexure 3 JAYNA AGENDA NO. 2 - REVENUE COLLECTED IN NOV AND DEC 2017 UNDER GST INCLUDING SETTLEMENT OF FUNDS 25th GST Council Meeting 18th January, 2018 Vigyan Bhavan CHAIRMAN'S INITIALS Page 43 of 104 MINUTE BOOK November receipts GST REVENUE FOR MONTH OF NOVEMBER, 2017 Funds transferred (Figures in Rs. Crore) Net revenue due to settlement after settlement CGST 13692 10145 23837 SGST 20295 13882 34177 IGST 44784 -24027 20757 Cess 7160 7160 Total 85931 Revenue shortfall of States: Rs. 8989 crores CHAIRMAN'S INITIALS GST REVENUE FOR MONTH OF DECEMBER, 2017 et (Figures in Rs. Crore) Decembe Funds Net r receipts transferred revenue due to settlement after settlement CGST 13986 10348 24334 SGST 19767 14488 34255 IGST 42114 -2....
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.... 30.9 6. J & K 63.9 35.9 28.0 Page 47 of 104 CHAIRMAN'S INITIALS M MINUTE BOOK STATES SHOWING MAXIMUM IMPROVEMENT UPTO DECEMBER 2017- CONTD... SI. No. Name of the State Percentage Percentage shortfall in shortfall revenue in revenue August December Percentage in reduction in shortfall in in December 2017 vis- 2017 2017 Ã -vis-August 2017 7. Haryana 40.3 18.1 22.2 8. Madhya Pradesh 43.4 23.6 19.8 9. Rajasthan 34.8 18.9 16.0 10. Goa 39.9 24.0 15.9 11. Telangana 27.8 13.4 14.4 12. Assam 39.5 25.4 14.1 CHAIRMAN'S INITIALS Page 48 of 104 10 10 JAYNA BOOK DEPOT MINUTE BOOK Extd, 1949 Annexure 4 JAYNA Presentation for the 25th Meeting of GST Council Agenda Deemed Ratification of Notifications / Circulars etc. Decisions taken by GIC Issues for approval of GST Council NATION TAX MARKET CHAIRMAN'S INITIALS Page 49 of 104 CHAIRMAN'S INITIALS MINUTE BOOK Ratification of Notifications, Circulars and Orders 9 INATION TAX MARKET Ratification of following notifications, circulars & orders issued after 23rd GST Council meeting : Act/Rules CGST Act IGST Act UTGST Act Circulars Type Central Tax Central....
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....oices of inward & outward supplies in case of inverted duty structure refund ✓ Notification No. 70/2017 - CT dated 21.12.2017 issued Page 51 of 104 my CHAIRMAN'S INITIALS CHAIRMAN'S INITIALS MINUTE BOOK Decisions of GIC post 9.11.2017 (4/6) • Decision by Circulation (13.12.2017-contd.) INATION TAX MARKET Circular on manual filing & processing of refund claims on account of inverted duty structure, deemed exports & excess balance in electronic cash ledger ✓ Circular No. 24/24/2017-GST dated 21.12.2017 issued Decision by Circulation (26.12.2017) B • . To provide for Centralized UIN for Foreign Diplomatic Missions / UN organizations Notification No. 75/2017 - CT dated 29.12.2017 issued Amendment of FORM GST REG-10 for registration of OIDAR service providers Amendment of rule 89(4) to provide separate treatment of ITC availed in respect of inward supplies (obtained at concessional rate) for merchant exports, domestic supplies & common inputs Decisions of GIC post 9.11.2017 (5/6) • Decision by Circulation (26.12.2017- contd.) NATION TAX MARKET ⚫ Insertion of rule 96(9) to limit refund of IGST to persons availin....
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.... 54 for issuance of special invoice by normal registered person to an ISD Rationale/Reason It was observed that situation being dealt with is quite different from the main sub-rule (5) & also that the said proviso was silent about the method of valuation for value of goods repossessed from a defaulting borrower who is a registered person No mechanism for an ISD to receive and pay tax on services under reverse charge & no mechanism for the normally a registered entity to transfer credit, in respect of such common services received under reverse charge, to the ISD NATION TAX Agenda Note No. 7(i) - Amendments in the CGST Rules (3/5) MARKET 12 Proposed Change No. 6 Insertion of rule 55A 7 8 To replace sub-rules and (4B) of rule 89 23.10.2017 Rationale/Reason To prescribe document required to be carried by the person-in-charge of the conveyance. where e-way bill is not required to be carried (4A) To correct typographical errors & bring in w.e.f. reference to Customs notification No. 78 & 79/2017-Customs (NT) both dated 13.10.2017 To amend rule 96 w.e.f. 23.10.2017 to provide for refund of integrated tax on export of services in FORM GST RFD-01 i....
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....s. 50/- per day (Rs. 25/- per day under CGST Act & Rs. 25/- per day under the respective SGST Act) Rs. 20/-per day (Rs. 10/- per day under the CGST Act & Rs. 10/- per day under the Bringing the late fee on par respective SGST Act) in case there is no with late fee for FORM outward supply in a month/quarter GSTR-3B & GSTR-4 FORM GSTR-6: late fee proposed to be reduced to Rs. 50/- per day (Rs. 25/- per day under CGST Act & Rs. 25/- per day under the respective SGST Act) CHAIRMAN'S INITIALS Page 56 of 104 JAYNA BOOK DEPOT Estd. 1949 JAYNA 18 MINUTE BOOK Agenda Note No. 7(iii) - Extension of filing date S. No. INATION TAX MARKET Proposed Change Extending the due date for filing return in FORM GSTR-6 by an Input Service Distributor for the months of July, 2017 to February, 2018 till 31.03.2018 Rationale/Reason Non availability of offline utility on the portal common Agenda Note No. 7(iv) - Notification of e-way bill portal S. No. 1 Proposed Change Rationale/ Reason INATION TAX MARKET Notification of www.ewaybillgst.gov.in as the Coming into force of e-way Common Goods and Services Tax Electronic bills w.e.f. 01.02.2018 for Portal for genera....
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....omposition scheme Cancellation of Registration of migrated taxpayers Intimation of details of stock (CMP-03) Non-Resident Taxable Person Registration Engage/ disengage GST Practitioner, GSTP Dashboard, and Locate GSTP Application of cancellation of new taxpayer GSTR-1+ Offline Utility GSTR-2A viewing by Buyer GSTR-38 GSTR-2 GSTR-1A Offline Utility for GSTR-2 Offline Tool for GSTR-38 Offline tool for ITC-04 Edit of GSTR-3B Offline Tool for GSTR-4 GSTR 6, (for Input Service Distributor (ISD) GSTR-5A for OIDAR (Online Data Access or Retrieval Services) ITC 02: Declaration for transfer of ITC in case of Sales merger etc. GSTR 5: Return for Non Resident Taxpayer GSTR 11: Return for UN bodies. ITC 01: Facility for declaration for claim of ITC. Page 61 of 104 GIN SIN CHAIRMAN'S INITIALS M CHAIRMAN'S INITIALS MINUTE BOOK Services made available on GST Portal Payments Transitional Forms Online Payments through Internet Banking and NEFT/ RTGS Offline Payments-Over the Counter (Authorised Bank) for amount upto Rs 10,000/- Creation and maintenance of Electronic Cash Ledger Form GST PMT-07 - Grievance for payment Tran Form 1-Transitional ITC/Stock Statem....
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.... 64,60,283 87.05% 78,84,955 77,79,225 80,62,358 78,84,955 39,34,256 77,79,225 43,68,711 61,44,925 80,62,358 49,13,065 65,84,977 83.51% 78.99% 58,70,114 72.81% Returns GSTRA (September Quarterly Return] 11,48,165 11,48,165 7,66,292 66.74% Returns: GSTR-1 (Outward Supplies) (July) Returns: GSTR-1 (Outward Supplies) (August) Returns: GSTR-1 (Outward Supplies) (September) Returns: GSTR-1 (Outward Supplies) (October) Returns: GSTR-1 (Outward Supplies) (November) 66,86,012 66,86,012 53,30,468 53,58,972 80.15% 74,21,661 42,21,881 78,84,955 31,99,780 17,69,344 78,84,955 18,46,355 57.70% 47,21,559 49,31,818 62.55% 77,79,225 42,21,881 35,57,344 15,60,471 16,81,691 80,62,358 42,21,881 38,40,477 13,96,053 15,37,715 47.27% 40.04% GST System - GSTR-1 Filing Trend for last 10 days 1400.000 GSTR-1 Filing - last 10 Day's Trend 1,200,000 1,000,000 8000,000 600,000 400,000 260,456 200,700 417.363 425,330 395.933 397,892 412,411 194,165 610,594 859.577 1,211,085 0 108-18 2-Jan-18 3-Jan-18 4-Jan-18 5-Jan-18 4-fan-18 7-Jan-18 8-1818 9-31-18 10-Jan-18 Jul 17 Aug 17 Sep 17 #Oct 17 Nov 17 Dec 17 Daily Total 4 7th Jan was a Sunday 8t....
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....0% 90.62% 80.00% 60.00% 40.00% 20.00% 1.05% 0.00% Zero 1 to 50 51 to 100 101 to 200 201 to 300 307 to 400 401 to 500 501 to > 1000 1000 91% of the tax payers have less than 50 purchase invoices that need to be accepted Page 80 of 104 JAYNA BOOK DEPOT td, 1949 JAYNA B MINUTE BOOK 1 10 Issue2: Granularity of Invoice data Currently GSTR-1 expects taxpayer to upload invoice data summarized at a rate- level. While rate-level summary reduces the "volume" of data submitted, it does not make it more convenient to tax payer. On the contrary, it introduces more "work" for taxpayers - The artificial rollup at rate-level complicates matching and acceptance to both GSP/ASPs and small tax payers Recommendation Invoice data be should accepted at Item Level along with an Item Number field and HSN code. Implementation in phases. Phase-1 only at invoice value with HSN level data in a separate table Phase-2 (after system stabilizes): At line item level with HSN code there thus removing the HSN table Issue3: Should there be separate periods for filing returns? Current Return filing (GSTR-1, GSTR-2, GSTR-1A, GSTR-6) is a workflow driven system. Multiple entiti....
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....OOK Estd. 1949 51 Illustration of Option-1 10 invoices JAYNA B SZ 7 invoices Return of April . • Everyone uploads B2B sales invoices by 10th May (S1 uploaded 8 invoices and S2 uploaded 4 invoices) System drafts return (B2B part) based on B2B sales data on 11th Taxpayer B can add missing purchase invoices (2 from $1 and 3 from S2) and files return after adding B2C, exports etc.. For Return of May, $1 adds 1 out of 2 invoices added by B, on 9th June. B gets credit of this invoice in May return in addition to his ITC of May. In June return, S2 adds 2 out of 3 invoices added by B. B gets the ITC for 2 invoices in addition of ITC of June. In July return filed in August, liability of 5 invoices added by B in his April return is added to his liability without interest. (He had already got ITC of 3 invoices. Thus actual reversal is of 2 invoices which were not added by the sellers. ⚫ Simple to track, reversal is cleaner. Illustration of Option-1 137 Return Filed in May Return Return filed Added invoices Total filed June in in July reversed in Return impact filed in August Auto- drafted Added by B Added by $1 Added by $2 8 out of 10 2 ou....
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....eryday at night. 1 21 • Option-2 Details Matching on GSTIN (seller); GSTN(Buyer), Invoice No; Invoice Date and Tax Amount ⚫ Probable matches will be shown in case one parameter does not match and others match. . Only one opportunity to file amendment of mismatched invoices. Taxpayer can save it many time after making corrections. Correction opportunity shall be available round the month. ⚫ Interest on corrections (other than invoice number based mismatch) on monthly basis, as under done under Income Tax as keeping track of it at invoice level will be difficult Periodicity for filing of the return shall be monthly for all. Page 84 of 104 JAYNA BOOK DEPOT Estd. 1949 JAYNA MINUTE BOOK 22 Experience from States which have implemented Invoice level data for Return with sale and purchase data Gujarat • Mismatch is generated on need basis (refund or assessment etc.) . Mismatch is not shown to taxpayers Basically eye-ball matching to be done by Tax Officer to derive intelligence out of it. . No auto-reversal Andhra Pradesh • Take data at invoice level but use Counterparty (ledger) level data for mismatches • • Taxp....
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....ase data is to be Taxpayer has to match only data under mismatch compared with purchase register category and probable match. However, mismatch on both sale as well as purchase data will be there. With high % of mismatch seen in states, the total volume of data to be reconciled will be same as that under Option- 1 26 Comparison of Option-1 and 2 Workflow Driven (Option-1) System Matching (Option-2) Eliminates artificial mismatches introduced Artificial mismatch is generated. by system. Buyer is dependent of the supplier for upload of his purchase data which is sales data of counterparty. Mismatch percentage is estimated to be lower but there is no empirical evidence as such a model does not exist. Opton-1 which is akin to current GSTR- 1/2/3 and hence may be more appealing to large taxpayers having large number of invoices Buyer is not dependent on supplier to upload, However, he is dependent on supplier for correction. Mismatch after many years in States is at 12% without Probable Match which if added takes the figure to 40%. This kind of mismatch will lead to huge workload on tax officers as they will be required to issue notices. Mismatch generation w....
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.... ⚫ Tax officers to use data on mismatch for admin purposes in early stages when auto reversal is not there. Stabilize the system including enhancements based on user experience/industry feedback • Invoice level data first. After system stabilizes, line item level data can be thought of. • " TDS/TCS may be postponed for one more year to give time to new system to stabilise. First TDS may be implemented and after that system gets stabilized, TCS should be implemented. Proposed Gradual Transition Plan Current Process (... till TBD) Self-declared GSTR-3B for payment of taxes and declaration of TC/Liability Menthly/Quarterly filling of GSTR-1 for outward supplies Transition Phase (9 months) Introduce new Return with sales and purchase annexures Taxpayer should be able to file New Return without annexures (During the period development of new Return software takes place and all accounting software companies and GSP get ready. GSTR-2 Annexures could be filed separately Payment is made with Retur After 3 months make annexure filing along with Return Page 88 of 104 End-State (from TBD) Start auto-reversal 1 33 JAYNA BOOK DEPOT ....
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....ial mismatch will make automatic reversal of credits an unacceptable option - Without the threat of automatic reversal or liability, there is little or no incentive for taxpayers to correct the mismatches which will only increase the mismatch Evidently, the VAT model of System matching without any auto-reversal and reliance on Tax Official intervention has not yet been successful to establish the core principle M Now let us take a look at the GSTR-1-2A-2-1A model âš« The model "attempted" to solve the system matching problems by introducing an acceptance workflow for invoice matching. As a principle - a step in the right direction. âš« While GSTR-1 was reasonably successful, GSTR-2A and & 2 did not work as planned - While 27 Lakh Taxpayers (58% of eligible) filed GSTR2, majority were NIL return filers From a invoice count perspective only 1.5 crore invoices went through the acceptance cycle as opposed to a 13.16 crore invoices (i.e. only 11%) âš« It has been presumed that comparing Supplier provided invoice with Purchase books was too much a burden. But is it? CHAIRMAN'S INITIALS Page 92 of 104 JAYNA BOOK DEPOT Estd. 1949 MINUTE BOOK 110 JAYNA Com....
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....atural business cycle of verification & payment of supplier invoices 114 115 Highlights of the proposed solution - Invoice Upload ⚫ Suppliers "upload" sales invoices on the GST System which automatically calculates his/her liability. Invoice is also made available to Buyer for acceptance ⚫ Key Contrasts from GSTR-1 - It is simply an Invoice "Upload" - not "filing" of return - Invoice format and data granularity to exactly match the actual invoice submitted by supplier for payment viz. Invoice Item Level right from day one-not rolled up at tax rate or commodity levels Upload happens on a continuous basis. It means the verification and acceptance coincides with the actual business transaction. Invoices uploaded after the 10th is automatically included in next return - Market forces will evolve a model where invoice is paid only after upload on GST System Page 94 of 104 JAYNA BOOK DEPOT MINUTE BOOK Estd. 1949 B JAYNA • Highlights of the proposed solution - Invoice Acceptance 56 Buyer "accepts" supplier invoices on the GST System which automatically determines the input tax credit (ITC) ⚫ Key Contrasts from GSTR-2 and pure System Matching ....
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....mated accounting systems can view and accept pending invoices directly on the portal - Small-Medium Taxpayers with some level of automation can use Excel based offline tool to download, compare and accept pending invoices Large tax payers with fully automated accounting will do the reconciliation and acceptance directly in their accounting system and upload results directly through APIs Proposed Solution . ⋅ Continuous upload'acceptance of involtex Upload Fayer 30 Ap 1 20 GSTR-3 Control Acces by Rayer Accept, Finalize, Pay & File 10th May 20h May Continuous invoice upload/acceptance with counter parties - No cut-offs Remove concept of provisional ITC • No uploading of missed invoice or modify supplier invoice. Consequently, no mismatch or ITC reversals 121 We further propose a Gradual Transition so that it ... ⚫ Eliminate risk of adoption issues impacting tax collection Provide sufficient time to stabilize the system including enhancements to improvements to user experience based on industry feedback Provide sufficient time to taxpayers to adapt to the new model - understand counter- party behavior & data quality and implement corre....
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....y mismatch is due to difference in Invoice No. and Date. This happens due to dual version of same data flowing from both parties. Having a single version of data will reduce initial mismatch levels to a great extent - Since incentives are aligned to business interest, there will be greater focus to upload correct data 126 In conclusion... + We must agree on the core principle of... Input Tax Credit will be provided only on "matched" invoices âš« Any model that increases tax payer burden, or relies on tax officer intervention is likely to fail. âš« A successful model is one which aligns with the natural business process and not make Tax return preparation a separate function " The proposed model will result in lower compliance burden to the tax payer, higher revenue collection and reduced administrative burden to the officials Page 98 of 104 JAYNA BOOK DEPOT MINUTE BOOK Estd. 1949 Annexure 9 JAYNA REPORT OF THE COMMITTEE ON HANDICRAFTS December 2017 HANDICRAFTS Officer's Meeting- 11.01.2018 Terms of reference of the Committee • To evolve a definition of handicraft goods based on its way of manufacture and cultural and heritage linkages â....
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....rel, vats) 12 5 4420 6 45039090/450490 Statuettes & other ornaments of wood, wood marquetry & Inlaid, jewellery box, wood lathe and lacquer work [including lathe and lacquer work, ambadi sisal craft] Art ware of cork [including articles of sholapith] 12 7 4601 and 4602 18 5/12 Mats, matting and screens of vegetable material, basketwork, wickerwork and other articles of vegetable materials or other plaiting material, articles of loofah (including of bamboo, rattan, canes and other natural fibres, dry flowers (naturally dried), articles thereof, ringal, raambaan article, shola items, Kouna/chumthang (water reeds) crafts, articles of Water hyacinth, korai mat] Page 101 of 104 CHAIRMAN'S INITIALS CHAIRMAN'S INITIALS MINUTE BOOK 5. No Heading Item Existing Rate 8 4823 Articles made of paper mache 5 9 5607, 5609 Coir articles 5 10 57 Handmade carpets and other handmade textile floor coverings (including namda/gabba) 12 11 58043000 Handmade lace 12 12 5805 Hand-woven tapestries 12 13 580810 Hand-made braids and ornamental trimming in the piece 12 14 5810 Embroidery in the plece, in strips/in motifs 5 15 6117, 6214 Handmade/han....