AI Drafter 
TaxTMI 
TaxTMI 
Minutes of the 25th GST Council Meeting held on 18 January 2018
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..... Decisions of the GST Implementation Committee (GIC) for information of the Council 5. Minutes of 4th and 5th 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. Any other agenda item with the permission of the Chairperson i. Proposal to declare the sale of goods in Customs bonded warehouse and goods sold as high sea sales as 'no supply' ....
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....graph 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 collection during the month of November, 2017 was Rs. 85,931 crore and during December, 2017, it was Rs. 83,716 crore. He stated that the revenue collection showed a declining trend. He stated that the combined revenue shortfall for States ....
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....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 actually sold to buyers. He stated that this would lead to reduction in the accumulated amount of IGST and increase in the IGST settlement amount. He added that some amount from the IGST kitty, such as the input tax credit on exempt goods, wou....
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....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 this showed substantial revenue leakage in the inter-State movement of goods. 6.7. The Secretary stated that the experience showed that initially, due to fear of matching etc., return filing was high but now over a period of time, the taxpayers ....
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....hould 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 of Rs. 1,35,000 crore lying in the IGST account, a sum of Rs. 35,000 crore shall be provisionally settled between the Centre and the States. 50% of this amount shall be allocated to the Central Government and the remaining 50% shall be provisionally distribut....
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....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 this one month, e-Way Bill system for intra-State movement could be operated on a trial basis. As regards the functioning of GSTN, he stated that glitches and mismatch count were reduced. Further, the reconciliation between count of records (registration, challan and returns) sent....
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....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 of e-Way bill system were in use like web, SMS, mobile app, and Bulk upload through Excel Tool. APLs would be released shortly. He added that training was imparted to the master trainers of all States and one training had been done for CBEC and another would have been done on 18 January....
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.... 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 taxpayers did not file GSTR-3B from July to November, 2017 and a list of such taxpayers had been shared with the Central and the State tax administrations. The Hon'ble Deputy Chief Minister of Delhi suggested to give a combined State-wise list of such taxpayers to understand the trend acros....
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....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 invoices was a tedious process; linking details as per HSN code increased their work and B2C reporting of large transactions did not serve any purpose and increased compliance. He stated that the Committee's recommendation was to track credit at invoice level supplies as it provided a clear mechanism for co....
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....ay 10th 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 11th 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 details at invoice level. This Option also involved any time uploading of invoices and mismatched invoices could be matched on daily basis. Under this option also, the periodicity would be monthly. 14.4. The CEO, GSTN further stated that during the meeting with the Law Committee held on 4 January, 2018, Opt....
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....ave 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 fraudulent claims knowing fully well that detection would be hard. He stated that in the GSTR-1, 2A and 1A model, acceptance-based matching on the basis of comparison of supplier's invoices with purchase books was considered to be too much of a burden. He stated that this was not a correct understanding and the ....
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....cally 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 accounting packages. 14.8. He proposed to eliminate the concept of "Provisional Credit". However, buyers could "notify" supplier through the system to upload any missed invoice but could not upload or modify it themselves. In this model, there would be no "mismatch" in the traditional sense and hence there would be n....
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....ekani 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 time and once mismatch was minimal, a system could be brought into force in which input tax credit would not be given until the seller uploaded the invoice(s). He then sought comments of the States on the proposed model. 14.11. The Hon'ble Minister from Kerala raised a question regarding the fate of B2C invoices. The Se....
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....gainst 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, but Model B of option II would never be acceptable to the stakeholders. He added that for 98% of taxpayers, average number of invoices to be uploaded may be only 9, but a single chartered accountant or consultant handled returns of 100 to 150 taxpayers, both as a supplier and recipient. He gets all the details from taxpayers just....
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....iance 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 uploaded before making payment might need a change in the business practice of small taxpayers. He further observed that instead of return filing being once a month process, now it would become a daily process. Shri Nandan Nilekani responded that the choice lay with the seller as to at what interval he would upload the invoices. The P....
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....th 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 input tax credit for missing invoices should be implemented only after the transition period was completed. Once the gap in matching of sale and purchase invoice was reduced, input tax credit would be made available only on the basis of sales invoice and the computer would auto generate the return. He stated that the salient/selling point of....
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....osed 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-reversal in either of the two Options, but there could be greater burden under Option II. He added that in the model proposed by Shri Nandan Nilekani, a taxpayer can be further incentivi sed by placing a mechanism in the system for auto generation of return in case of 100% match of sales invoice. 14.21. Shri Jagdish Chander Sharma, Principal ....
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....ed 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 Nandan Nilekani could be examined by the Group of Ministers on IT Challenges in GST Implementation, headed by the Hon'ble Deputy Chief Minister of Bihar, in consultation with the members of the Committee on Return Filing and Shri Nandan Nilekani. The issue could then be decided by the Council through video conference. The Council agreed to this proposal....
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.... 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, the Committee arrived at the following definition of handicrafts: "Handicrafts are goods predominantly made by hand even though some tools or machinery may also have been used in the process; such goods are graced with visual appeal in the nature of ornamentation or in-lay work or some similar work of a substantial nature; possess distinctive features, which....
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....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 rates could be taken up by the Fitment Committee separately. The Hon'ble Chairperson suggested that the Council could accept the report and the recommendations of the Committee on Handicrafts and States could give · additional items to be considered as handicrafts which would be considered by the Committee on Handicrafts. The Council agreed to this suggestion. 19. For Agenda ite....
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.... 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 proposal at Sl. No.21 of Annexure I, which related to a proposal to insert an explanation in Section 13 of the CGST Act, 2017 to clarify the term 'supply is identifiable' in case of vouchers in Sections 12 and 13 of the CGST Act, 2017. The second was the proposal at Sl. No. 46 of Annexure I to amend the explanation to the definition of "continuous journey" which does not consider single ticket flights with sto....
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....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 defined. It was also proposed that composition scheme should not be extended to persons making inter-state supplies; no input tax credit should be allowed to purchasers buying from composition taxpayers; and manufacturers of aerated water should be kept out of composition scheme through a notification. The ACS, Uttar Pradesh suggested that like aerated water, brick kiln should also be kept out of the composition scheme ....
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....hat 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'ble Minister from Punjab suggested that the Constitutional validity of the proposed amendment should be ascertained. The Secretary stated that this issue would be got examined both Constitutionally and through the Law Committee. 20.3. The Hon'ble Chairperson stated that on the basis of the approval of the proposed changes in the Law, the Law Committee would draft the legislative changes and after its vetting by the Union L....
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....posal 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 informed that in one city in Gujarat, 8-9 processes were carried out on one diamond, and therefore, it involved 8-9 movements of one diamond. He stated that it would be cumbersome to levy 3% tax for each such movement. He informed that the initial proposal was to have a separate low rate of tax for diamonds for B2B transactions or to have a scheme like that adopted in Belgium to charge no tax for supplies within a Closed User Group. He informed that the Fitment....
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....xure 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 Annexure I: (a) Rice Bran for use as aquatic, shrimp feed, prawn feed, poultry feed and cattle feed, (b) Rice bran for other uses (HSN Code 2302) 21.10. Dr. D. Sambasiva Rao, Special Chief Secretary, Andhra Pradesh, stated that rice bran for cattle and poultry feed was not the same as used for extracting oil, and therefore, rice bran being mostly used for cattle feed, should be exempt from tax. The Hon'ble Minister from Telangana supported this view. The Joint Secretary (TRU-....
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....yana 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 generally! the GST rate of tax for processed food was 12% with a few exceptions, like unbranded namkeens, chikki, etc. The Hon'ble Minister from Tamil Nadu stated that pickle manufacturers were in cottage industry, and, therefore, pickles should be taxed at the rate of 5%. The Hon'ble Minister from Kerala stated that these were ready to eat items, and therefore, these should be taxed at the rate of 5%. The ACS, Tamil Nadu, stated that except oil, the other inputs used for manufacturing p....
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....nts 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 recommendations of the Fitment Committee and also directed it to re-examine the rate of tax on spare parts for cochlear implants. Serial No.95 of Annexure II: Sanitary napkins CHSN Code: 9619): 22.7. The Hon'ble Minister from Kerala stated that the rate of tax one co-friendly sanitary napkins should be lowered from the present rate of 12% which were produced by Women Groups and that there should be some distinction between eco- friendly products and those made from Polyesters. The Hon'ble Chairperson state....
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....dly 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 Hon'ble Minister from Goa supported this proposal and stated that once tourists went elsewhere, they would not come back to India in future. The Hon'ble Chairperson stated that this was a good case for review once the revenue position improved. 24.1. The Hon'ble Ministers from Goa and Kerala stressed that the high rate of tax on hotels was counter-productive and that the Fitment Committee should give a report on the rate of tax on room rents of hotels. The Hon'ble Chairperson observed that in order to keep their room tariff at less than Rs. 7,500 per day, h....
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.... 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 discussed separately to find a solution. 25. For Agenda item 10(ii), except Serial No.26, the Council approved the other recommendations ofthe Fitment Committee, contained in the Summary Sheet of this Agenda item. Agenda item 11: Carry forward items from the previous Council Meeting Agenda item 11(i): Presentation on GST in Real Estate sector 26. The Secretary suggested that discussion on this Agenda item could be deferred due to paucity of time The Hon'ble Minister from Punjab stated that bringing petroleum products under GST should also be discussed in the next Meetin....
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....m 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) of the Customs Tariff Act, whichever was higher. Concomitantly, it was proposed to exempt/declare the sale of warehoused goods within the Customs bonded warehouse as ' no supply' under Schedule ill of the CGST Act, 2017 in order to ensure that no integrated tax was payable in case goods were sold by the importer while these were kept in the Customs bonded warehouse. It was also proposed to declare high sea sale of goods as 'no supply' under Schedule III of the CGST Act. The Council agreed to the proposal. 32. For Agenda item 13(i), the Council approved the following: 1. Sale of goods w....
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....truction 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 first two instances of not carrying e-Way bill and to impose full penalty for the third default and onwards. The CCCT, Andhra Pradesh, stated that in his State, penalty for not carrying e-Way bill was 200% of the total tax involved and they had so far collected approximately a sum of Rs. 15 crore as penalty. He stated that the violators were mostly dealers from other States. He expressed that penalty should not be as low as Rs. 500. 33.3. The ACS, Uttar Pradesh, stated that in his State, penalty for not carrying e-Way bill was 40% of the tax evaded amount and traders were paying this amount. He added that checks....
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....ntra-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. He added that various States had experience in implementation of e-Way bill system and suggested that penalty should not be reduced. The Hon'ble Minister from Jammu & Kashmir suppm1ed this suggestion. Shri Khalid A. Anwar, Senior Joint Commissioner, West Bengal, stated that penalty for carrying goods without documents is up to Rs. 10,000. Assuming that the tax amount itself came to say Rs. 1000- Rs. 2000, in such case, the penalty amount would become very high. Therefore, it should be kept at an average level, preferably in the range of Rs. 3,000. The Hon'ble Deputy Chief Minister of Gujarat stated that penalty amou....
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....dakh, 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 security. He informed that 10 cases of tax evasion involving seizure of 100 kg of gold had taken place in his State in last 3 months. He also stated that organised trade transported gold' through specialised precious cargo transporters and cargo was presently being declared by such transporters. He added that with the present declaration, not a single case of law and order issue had come to light and that law and order issue should not be mingled with taxation aspect. He observed that tax on gold had already been reduced and coupled with this loophole, a lot of gold could be transported without payment of tax. The Secretary s....
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....stem 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 that there should be no excessive use of authority. 34. For Agenda item 13(ii), the Council did not approve the proposal to reduce penalty under Section 122(i)(xiv) of CGST Act, 2017. However, the Council approved to defer imposition of penalty on informal basis for failure to take e-Way bill for movement of goods during the month of February, 2018. The Council further agreed that the desirability of introducing e-Way bill system for movement of gold ~hall be examined by the Law Committee. Agenda item 13(iii): Restriction of Transitional Credit in certain cases through the provisions for removal of difficulty under Secti....
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....n 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, 1975; iv. The above changes to apply retrospectively with effect from the appointed day i.e. 01.07.2017. 37.1. The Council agreed to thy above proposals. 38. For Agenda item 13(iv), the Council approved the proposals contained in paragraph 37 above. Other Issues 39. The Hon'ble Minister of Tamil Nadu circulated a written speech during the Council Meeting. In the written speech, the Hon'ble Minister welcomed the recommendations of the Committee on Return Filing, which recommended to bring down the compliance workload. He expressed a note of caution that generation of monthly report of the taxpayer for a mismatch between input tax credit claimed and input tax credit mis....
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....t 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 reduction to consumers. He expressed reservation regarding the suggestion to bring stamp duty under GST. He suggested to take a considered decision regarding reverse charge mechanism as without it, cash transactions could increase and could result in tax evasion in respect of goods having fast moving inventory, such as agricultural produce, old gold, etc. He did not support the proposal to define the place of supply for accommodation services to be the place of registration in case of registered recipients. Agenda item 14: Date of the next Meeting of the GST Council 40. The Hon'ble Chairperson stated that, in all likelihood, the next meeting of the Council shall take place through video c....
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....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 Kumar Shri P.K. Jain Shri Sandeep M. Bhatnagar Shri Alok Shukla Shri Amitabh Kumar Shri Upender Gupta Shri Udai Singh Kumawat Shri Manish Kumar Sinha Shri G.D. Lohani Shri Yogendra Garg Shri S.K. Rehman Shri Sanjay Gupta 21 Govt. of India Shri Sachin Jain 22 23 Govt. of India Govt. of India 24 Govt. of India 25 Govt. of India 26 Govt. of India 27 Govt. of India 28 Govt. of India 29 Govt. of India 30 Govt. of India 31 Govt. of India 32 Govt. of India 33 Govt. of India 34 Govt. of India 35 Govt. of India 36 Govt. of India 37 Govt. of India 38 Govt. of India Shri D.S. Malik Ms Sheyphali B. Saran Shri S.K. Rai Shri Nagendra Goel Shri Parmod Kumar Shri Pramod Kumar Shri N Gandhi Kumar Shri Ravneet Singh Khurana Ms Himani Bhayana Shri Mahipal Singh Shri Devranjan Mishra Shri Susanta Mishra Ms Nisha Gupta Shri Siddharth Jain Shri Vikash Kumar Ms Gayatri PG Shri Satvik De....
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....handan CBEC, (Zones) Govt of India, 69 Shri Pradeep Kumar Goel Commissioner, Meerut CBEC, (Zones) Govt of India, 70 Shri Neerav Kumar Mallick Commissioner, Bhopal CBEC, (Zones) Govt of India, 71 Shri Pramod Kumar CBEC, (Zones) Govt of India, 72 Shri Javed Akhtar Khan CBEC, (Zones) 73 Govt of India, CBEC, (Zones) Shri G. V. Krishna Rao 74 Govt of India, CBEC, (Zones) Shri R.C. Sankhla Commissioner, Delhi Commissioner, Ahmedabad Pr. Commissioner, Bengaluru Commissioner, Lucknow CHAIRMAN'S INITIALS JAYNA BOOK DEPOT Page 39 of 104 CHAIRMAN'S INITIALS MINUTE BOOK 75 Govt of India, CBEC, (Zones) Shri Mandalika Srinivas Govt of India, 76 Shri W.L. Hangshing CBEC, (Zones) Govt of India, 77 Shri S. Kannan CBEC, (Zones) Govt of India, 78 Shri Vijay Mohan Jain CBEC, (Zones) Govt of India, 79 Shri Virender Choudhary Commissioner, Hyderabad Chief Commissioner, Shillong Commissioner, Chennai Commissioner, Rohtak Commissioner, Vadodara CBEC, (Zones) Govt of India, 80 Shri B.K. Mallick Commissioner, Kolkata CBEC, (Zones) Govt of India, 81 Shri C.K. Jain Commissioner, Jaipur CBEC, (Zones) Govt of India, 82 Shri Milind Gawai Commissioner, Pune CBEC, (Zones) Govt of India, Pr. Commissioner, 83 Shri B....
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....jan Khobragade Shri Mansur MI Shri Raghwendra Singh Shri K.K. Khandewal Shri Ajay Kumar Sinha Commissioner, CT Additional Commissioner, CT (Tax Planning) Commissioner, CT Secretary-Cum- Addl. Commissioner of State Taxes State Tax officer Commissioner, CT Commissioner, State GST Dept. Principal Asst. Commissioner Kumar Commissioner, CT Madhya 127 Shri Sudip Gupta Pradesh 128 Maharashtra 129 Maharashtra 130 Maharashtra 131 Manipur 132 Mizoram Shri Rajiv Jalota Shri Dhananjay Akhade Shri Sudhir Rathod Shri Hrisheekesh Modak Shri Vanlalchhuanga Page 41 of 104 Dy. Commissioner, CT State Tax Commissioner Jt. Commissioner, State Tax OSD to Finance Minister Commissioner, CT Secretary, State Tax CHAIRMAN'S INITIALS CHAIRMAN'S INITIALS MINUTE BOOK 133 Odisha 134 Odisha 135 Odisha 136 Puducherry 137 Puducherry 138 Punjab 139 Punjab 140 Punjab 141 Punjab 142 Rajasthan 143 Rajasthan 144 Rajasthan 145 Rajasthan 146 Sikkim 147 Sikkim 148 Sikkim 149 Tamil Nadu 150 Tamil Nadu 151 Telangana 152 Telangana 153 Telangana 154 Tripura 155 Uttar Pradesh 156 Uttar Pradesh 157 Uttar Pradesh 158 Uttar Pradesh 159 Uttarakhand 160 Uttarakhand 161 West Bengal 162 West Bengal Shri Tuhin Kanta Pandey Shri Saswat ....
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....17 13% 14% Nagaland 15% Andhra Pradesh 17% Haryana 18% Uttar Pradesh 18% Gujarat Rajasthan 19% 19% Page 45 of 104 CHAIRMAN'S INITIALS MINUTE BOOK Revenue shortfall more than 20% in State Puducherry Himachal Pradesh Punjab Uttarakhand Meghalaya Bihar Dec'17 51% 49% 45% 44% 40% 39% Odisha 39% Chhattisgarh 37% J&K 36% Kamataka 31% Jharkhand 29% Tripura 28% Assam 25% Goa 24% Madhya Pradesh 24% Kerala 23% West Bengal 22% Sikkim 21% STATES WITH MAXIMUM REVENUE SHORTFALL SL Name of the State No. Percentage shortfall in October 2017 revenue Percentage shortfall in December 2017 revenue 13 1. Puducherry 39.5 51.5 Uttarakhand 50.0 43.8 3. Himachal Pradesh 46.8 48.8 4. Chhattisgarh 43.3 37.2 5. Bihar 41.5 39.3 6. Goa 41.5 24.0 7. J&K 40.1 35.9 8. Meghalaya 39.6 39.9 9. Punjab 39.0 45.3 10. Nagaland 35.4 14.7 11. Jharkhand 31.8 28.7 12. Odisha 27.9 39.2 13. Arunachal Pradesh 27.8 -0.9 14, Assam 26.8 25.4 15. Sikkim 26.7 21.1 16. CHAIRMAN'S INITIALS Madhya Pradesh 25.6 23.6 17. Karnataka 25.3 30.8 Page 46 of 104 JAYNA BOOK DEPOT Estd. 1949 JAYNA MINUTE BOOK STATES WITH LEAST SHORTFALL IN REVENUE Sl. Name of the State Percentage Percentage No. shortfall October in shortfall 2017 December in 2017....
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....r No. 22/22/2017-GST dated 21.12.2017 issued Manual filing of applications for Advance Ruling and appeals before Appellate Authority for Advance Ruling ✓ Circular No. 25/25/2017-GST dated 21.12.2017 issued Maintenance of books of accounts relating to additional place of business by a principal or an auctioneer for the purpose of auction of tea, coffee, rubber etc. ✓ Circular No. 23/23/2017-GST dated 21.12.2017 issued Page 50 of 104 JAYNA BOOK DEPOT std. 1949 JAYNA MINUTE BOOK Decisions of GIC post 9.11.2017 (2/6) Decision by Circulation (12.12.2017) • INATION TAX MARKET Extension of time limit for filing of FORM GSTR-5 & FORM GSTR-5A for the months of July, 2017 to December 2017 upto 31.01.2018 ⚫ Extension of time limit for filing of FORM GST CMP-03 upto 31.01.2018 ✓ Notification No. 68/2017 - CT dated 21.12.2017 Notification No. 69/2017 - CT dated 21.12.2017 Order No. 11/2017-GST dated 21.12.2017 issued Decisions of GIC post 9.11.2017 (3/6) • Decision by Circulation (13.12.2017) • ° • To insert columns 10 to 15 in Table 6 of FORM GSTR-1 NATION TAX MARKET To provide for both supplier & recipient of supplies declared as deemed export....
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....€¢ • NATION TAX MARKET Extension of time limit for filing of FORM GSTR-1 (Quarterly return for July - September, 2017) & FORM GSTR-1 (Monthly return for the months of July, 2017 to December, 2017) to 10.01.2018 Notification No. 71/2017 - CT dated 29.12.2017 issued Notification No. 72/2017 - CT dated 29.12.2017 issued Reduction of late fee in case of delayed filing of FORM GSTR-4 to bring it on par with late fee payable in case of delayed filing of the return in FORM GSTR-3B Notification No. 74/2017 - CT dated 29.12.2017 issued Circular on return filing ✓ Circular No. 26/26/2017-GST dated 29.12.2017 issued Agenda Note No. 7(i) - Amendments in the CGST Rules (1/5) S. No. Proposed Change Rationale/ Reason 2 INATION TAX MARKET FORM GST ITC-03: Proposal to 1 increase the time period for filing Functionality not available on the statement from 90 days to 180 common portal days the Composition scheme rates under To align with notification No. 1/2018- Rule 7 CT(R) dated 01.01.2018 3 Omit proviso to Rule 20 4 Allowing application for cancellation of voluntary registration within 1 year of date of registration FORM GST REG-29: Proposal Large number of taxpayers yet to avail to....
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....e in the e-way bill making the e-commerce operator liable for furnishing information Making a reference to notification No. 2/2017- Central tax (Rate) dated 28.06.2017 instead of the complete list of exempted goods improvements in the FORM 14 Agenda Note No. 7(i) - Amendments in the CGST Rules (5/5) S. Proposed Rationale/ Reason NATION TAX MARKET No. Change 10 Inclusion of To capture the details of documents required for processing refund claims on account of export of services Statements 2, 3 and 4 in FORM on payment of integrated tax, export without payment of tax and supplies made to SEZ unit or SEZ Developer (on GST RFD-01A payment of tax) Page 55 of 104 CHAIRMAN'S INITIALS MINUTE BOOK Agenda Note No. 7(ii) - Reduction in late fees (1/2) S. No. Proposed Change INATION TAX MARKET Rationale/ Reason 1 FORM GSTR-5 and GSTR-5A: late fee proposed to be reduced to Rs. 50/- per day (Rs. 25/- per day under CGST Act & Rs. 25/- per day under the Bringing the late fee on par respective SGST Act) with late fee for FORM Rs. 20/- per day (Rs. 10/- per day under GSTR-3B & GSTR-4 CGST Act & Rs. 10/- per day under the respective SGST Act) in case the amount of central tax payable is nil Agenda N....
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....ce of Order under Section 172 to clarify that in certain cases, credit of taxes & duties paid under the existing laws shall not be allowed to be claimed as transitional credit provisions b) NATION TAX MARKET Rationale/Reason To remove difficulty & ensure that the taxpayers do not avail of credit: a) in case of disputed credit under transition which has been blocked under section 17(5) of Act c) to take appropriate administrative steps such as blocking the credit CHAIRMAN'S INITIALS Page 59 of 104 ai CHAIRMAN'S INITIALS MINUTE BOOK Annexure 5 GIN GST System Update For 25th GST Council Meeting Date: 18th Jan 2018 Agenda 1.Services made available on GST Portal 2.Highlights from GoM Meeting 3.E-Way Bill Status 4.Statistics on Return Filing Page 60 of 104 GIN JAYNA EOOK DEPOT Estd. 1949 JAYNA MINUTE BOOK Services Made Available on the Portal & Stats Services made available on GST Portal Registrations Returns New Registration for Normal Taxpayer ISD Registration Enrolment for GSTP Opt for Composition scheme Casual dealer registration Amendment of Registration - for non-core fields Revocation of rejected application Processing of Registration of Migrated dealers TDS Registration Opt out f....
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.... (from Sep,2017) • GSTR-1 Filing till Dec 31, 2017 GSTR-1 Filing from Jan 1 to Jan 10, 2018 • GSTR-3B Filling % for last 3 days for consecutive 5 months : ~69% • Estimated Taxpayer Base at the commencement of the project : 65 Lac ⚫ Estimated Taxpayer Base during Enrolment stage(Apr'17) AM 86.87 Lac Taxpayers base as on Jan'18 (validated and approved Taxpayers): Increase in Taxpayer Base % (from Commencement stage) Increase in Taxpayer Base % (from Enrolment stage) 99.32 Lac : 53% 15% Page 62 of 104 GIN GIN JAYNA BOOK DEPOT Está, 1949 B JAYNA MINUTE BOOK GST System - Filing Compliance Stats Returns Filing Eligible Opted for Quarterly Eligible Filed till Last day of Filing Filed till Jan14 2018 SIN % Completion till Jan14 2018 Returns GSTR-38 (Monthly Summary Return) (Jul) Returns: GSTR-3B (Monthly Summary Return) (Aug) Returns: GSTR-38 (Monthly Summary Return) (Sep) Returns: GSTR-38 (Monthly Summary Return) (Oct) Returns GSTR-3B (Monthly Summary Return) (Nov) 66,86,012 66,86,012 38,34,877 61,52,666 92.02% 74,21,661 74,21,661 27,25,183 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 65,84,9....
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....of Tax Turn Over (Rs in Cr) 24,562.46 5868.42 Average Quarterly Average Annual Turnover (in lakhs) 11.87 1.20 Turnover 47.48 4.8 Those above Rs 12 Lakhs 64,059 (9.2%) 13,062.45 20.39 81.56 80% of 3B filers filed seemingly consistent returns in all the 5 months • Finding consistent transactions based on turnover will be misleading because of seasonality and other factors • Implied tax rate is considered to be good measure (will address seasonality problem automatically) • CV of tax liability to turnover ratio is used to measure the consistent returns • With CV 0-5, 70% returns are consistent and 80% with CV100000 93% of the tax payers have less than 50 sales invoices that need to be uploaded Data from GSTR1/2A shows that 91% of tax payer have fewer than 50 invoices to accept 120.00% Purchase 98.37% 99.09% 99.40% 99.57% 99.84% 100.00% 95.94% 100.00% 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 dat....
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....ional Purchase details at Invoice level (Option-1) Simultaneous Upload of Sales/Purchase data (System matching) . Buyer-declared ITC by way of filing of Purchase details at Invoice level (Option-2) 1Apr • Option 1 115 Continuous uploadiacceptance of invoices Self-declored Provisional ITC at iwoice level Libited Accept by Buyer 30 Apr GSTR-3 Corned Accept by Buyer Accept, Finalize, Pay & File 10 May 20 May Regular invoice upload/acceptance with counter parties - No cut-offs Provisional ITC on basis of self-declaration at invoice level . Supplier needs to upload the missed invoice before specified period (1 or 2 months) If supplier defaults, provisional ITC will be reversed - but without interest Page 82 of 104 JAYNA BOOK DEPOT MINUTE BOOK 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 9....
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.... allowed ⚫ Offline Tool with facility to enter sale and purchase data. Based on annexures, Tool will generate Return part which can be filed separately, if required. Once data is fed in the offline tool, the relevant boxes in the return (in the offline tool itself) shall get populated. (There shall be option to feed B2C invoices also so that the tool can summarise B2C supplies also for the return). ⚫ System will do matching on 20th of following month and generate mismatch report based on exact matches and show "Probable Match" for guidance of taxpayers. ⚫ Continuous correction will be allowed and Matching S/W will be run everyday 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 inv....
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....K 125 Comparison of Option-1 and 2 Workflow Driven (Option-1) Matching of auto drafted purchase is done by taxpayers with their purchase register Number of returns to be filed: one but upload of outward supplies by 10th of next month has to be authenticated. Workflow is involved System Matching (Option 2) Matching is done by system but mismatched items are reconciled by the taxpayers by matching the data with Purchase register. Number of returns to be filed: one No workflow is involved Auto drafted purchase 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 ....
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....atched invoices. Ensure tax collection is not impacted (reduced or delayed) because of the cut- over. ⚫ Run chosen option without any auto reversal for 8 to 9 months so that trade/industry learn the system specially on how to correct entries to eliminate mismatches to adapt to the new model - understand counter-party behavior & data quality and implement corrective measures as required Rollout Recommendations ⚫ 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 ....
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....the high value provides sufficient cover to fraudsters to easily slip the fraudulent claims knowing fully well detection is going to be hard. (Needles in a hay-stack) • System Matching Model has the risk of getting stuck in an unbreakable degenerative cycle: The high level of initial 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 ⚫ 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. ⚫ 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 ....
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....e which achieves the agreed goal without the failure characteristics of increased tax payer burden or intervention of tax official. ⚫ In other words one which... ...aligns with the natural 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 "....
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.... of tax payers have fewer than 50 invoices in a month-that is hardly 2-3 invoices per day Small taxpayers with no automated 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....
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....ity 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 ⚫ Any model that increases tax payer burden, or relies on tax officer intervention is likely to fail. ⚫ 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 • To identify the goods und....
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...., 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/hand embroidered shawls 5/12 16 64032040 Kolhapuri chappals and similar footwear [ladhaki shoes] 5/18 17 6404 19 90 Footwear with uppers of jute textile material 5/18....