TaxTMI 
TaxTMI 
Minutes of the 27th GST Council Meeting held on 04th May, 2018
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.... Services Tax on goods supplied while being deposited in a warehouse 6. Change in the shareholding pattern of GSTN 7. Incentivizing Digital Payments in GST regime (Carry forward item from the 25th Council Meeting) 8. Imposition of Cess on Sugar under GST and reduction of GST rate on Ethanol 9. New System of Returns Filing 10. Any other agenda item with the permission of the Chairperson --Implementation Schedule of Intra State e-Way Bill in the States 11. Date of the next meeting of the GST Council 3. The Chairperson welcomed all the members present in the meeting. Before the beginning of the meeting, the Chairperson placed on record the appreciation for very active participation of Dr. Haseeb Drabu, Ex-Finance Minister of J & K State in the Council meetings during his membership of the Council. He informed that there were 3-4 main agenda items for discussion while others were of procedural nature. After these preliminary observations, discussion on the Agenda items was taken up. Discussion on agenda items Agenda Item 1: Confirmation of the Minutes of 26th GST Council Meeting held on 10 March 2018. 4. The Union Finance Secretary, Dr. Hasrnukh Adhia (hereinafter ref....
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....pe Notification Nos. CGST Act/ CGST Rules Central Tax 14 to 21 of 2018 Central Tax (Rate) 10 of 2018 IGST Act Integrated Tax (Rate) 11 of 2018 UTGST Act Union territory Tax 02 to 06 of 2018 Union territory Tax (Rate) 10 of 2018 Circulars Under the CGST Act 36 to 43 of 2018 Orders [Under the CGST Act 01 and 02 of 2018 The Notifications, Circulars and Orders issued by all the member States which are pari materia with the above notifications, circulars and orders were also deemed to be ratified. Agenda Item 3: Decisions of the GST Implementation Committee (GIC) for information of the Council. 8. Secretary stated that in between 26th and 27th GST Council meetings, certain decisions were taken by the GIC in its 14th, 15th and 16th meetings held on 19.3.2018, 26.3.2018 and 10.4.2018 respectively. He informed that in the Officers' meeting held on 03.05.2018, the officers had no comments on the agenda. However, an important judgement of Hon'ble High Court of Bombay in the case of·M/s. Abicor Binzel Technoweld Pvt. Ltd., Pune was also discussed, where the date for completing the process of filing of TRAN 1 was extended by the Hon'ble Court by its o....
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....nda Notes. The States like Himachal Pradesh, Uttarakhand, Punjab and Jammu & Kashmir had more than 30% revenue gap; the States like West Bengal, Gujarat and Karnataka were between 20% -30% and the States like U.P., Rajasthan, Maharashtra and Andhra Pradesh had revenue gap below 20%. Further, North Eastern States like Nagaland, Manipur, Mizoram and Arunachal Pradesh either were at par or were getting more revenue than the protected base revenue whereas States like Assam, Tripura and Meghalaya had revenue shortfall. He further informed that return filing was hovering around 64% by due date whereas cumulative returns filed for July 2017 had reached 96% and suggested that some action for enforcing compliance was needed. 10.3. Hon'ble Deputy Chief Minister of Bihar stated that the Centre should send officers to assess reasons of shortfall as revenue gap was 38% in their case. He further suggested that besides Bihar, team of officers might visit other States also where revenue shortfall was more than 30%. He said that GST revenue from the service sector was not as per the expectations. 10.4. Shri Arvind Subramanian, Chief Economic Advisor stated that GST revenue numbers for April e....
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....uggest ways to bridge the revenue gap. Hon'ble Chairperson observed that Chief Economic Advisor might visit those States which needed analysis of this kind, and as a test case, he might visit Punjab first, followed by Bihar. Hon'ble Finance Minister from Punjab further stated that Accountant General of Punjab had made a correction in revenue figures for the base year 2015-16. They had written a letter to the Union Finance Secretary on the issue and requested for an early decision. 10.9. Hon'ble Chief Minister of Puducherry stated that earlier their revenues were coming from trade that took place with adjoining States like Tamil Nadu and people used to make purchases in Puducherry due to lower tax rates. Now with same tax rates in GST, people made purchases in Tamil Nadu and Puducherry's GST collection had gone down. They were trying to improve revenue from services sector in Puducherry and also requested for the visit of Chief Economic Adviser to suggest revenue enhancement measures. 10.10. Hon'ble Minister from Kerala agreed with the submissions of the Chief Economic Advisor that 13% growth had been achieved with very little enforcement measures, no scrutiny ....
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.... substantially reduced. He explained that cess, instead of tax on Tobacco, had gone up, which had not been taken into account while preparing revenue shortfall data. Further, TDS system had not been put in place resulting into no tax from work contractors. He further added that as the State did not have developed services sector, it had no experience of administration of service tax and they had started intensive training in that direction. He also stated that average revenue from service sector was only ₹ 2-3 crore per month. He also requested that team of officers from Centre may be deputed to Himachal Pradesh to suggest the ways for revenue augmentation. 10.14. Hon'ble Minister from West Bengal stated that the States could have regular compensation mechanism on monthly basis or some other frequency, so that the State could do better planning. Secretary stated that IGST could not be identified as belonging to a particular State and the Centre until the assessee used it. Thus, IGST belonged to assessee until and it got converted into CGST or SGST revenue after its use. He stated that a group had already been set up with Joint Secretary (Revenue), Central and State offic....
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....sited in a warehouse 12. Secretary introducing the agenda informed that it was more of a technical issue that as discussed was discussed extensively in the Officer's meeting held on 03.05.2018 and was agreed to by all the officers. He stated that goods imported into India were subjected to Customs Duties including Integrated Tax under sub-section (7) of Section 3 of the Customs Tariff Act, 1975 and the payment of duty on such imports could be deferred by storing the goods in the Customs bonded warehouse. During such storage, the importer had the option to supply such goods to any other person even before clearance from the bonded warehouse. It had been clarified vide Circular No. 46/2017-Customs dated 24.11.2017 that Integrated Tax would be payable on such supplies and buyer would also pay the deferred Customs Duty at the time of clearance of goods from the warehouse. It had been represented that in this scenario, the buyer is being saddled with double payment of IGST. 12.1. He further informed that the GST Council in its 25th Meeting held on 18th January 2018, had given an in-principle approval to declare the supply of warehoused goods while being deposited in the Customs b....
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....istributed between the State and Centre and share of each State would be in the same proportion as at present. 14.1. Hon'ble Minister from Assam welcomed the proposal and stated that it could be accepted. Hon'ble Minister from West Bengal also welcomed the proposal but expressed concerns vis-a-vis human resources and stated that as per the proposal, existing employees would continue for 5 years with same kind of package. He further enquired whether it was necessary to have a special resolution of the Council to strengthen what was being done so that continuity of human capital was maintained, i.e. their terms of employment could not be changed suddenly, and they do not leave the company causing disruption to the operations. 14.2. Hon'ble Chairperson stated that when the present structure had been conceived, the thinking would have been to keep it as a non-governmental entity so that it had flexibility in hiring the best talent. He further stated that in the proposed structure of the Government Company with 50% - 50% shareholding by the Centre and the States, the Council must propose flexibility in hiring as suggested by West Bengal; otherwise GSTN would not get good t....
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....ce, it should be ensured legally that HR policy did not get diluted over time; otherwise GSTN could become another PSU with all the problems. 14.7. Hon'ble Chief Minister of Puducherry stated that it was a good move as whatever equity in GSTN was available, would be shared between Centre and States. He also welcomed the proposal regarding HR that the people who were experts in the field had to be retained and if the existing system of PSUs was followed, then it would be difficult to get experts in the field to improve the efficiency. He further stated that the Council might adopt a resolution regarding flexibility in HR matters and if Cabinet approval was required, the proposal of required HR flexibility should be got approved. 14.8. Hon'ble Minister from Tripura stated that he fully supported the proposal of making the GSTN wholly Government owned Company. About the HR certain apprehensions had been floated in the Council, but he did not think that there should be any such apprehensions as enough flexibility and continuity had been built in the proposal. 15. For Agenda Item 6, the Council in principle approved the following: 1. Allow GSTN Board for initiating the acqu....
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....7; 100 per transaction, so that the customers were incentivized to make payment using digital means. He further stated that this incentive would not be available in case of transactions relating to the composition dealers or in case where GST tax. rate was less than 3%. 16.1. Hon'ble Minister from Punjab welcomed the initiative and termed it as a great proposal. He further stated that as per the World Bank Report, in India, efficiency of GST collection was 45% only, indicating that there were leakages in GST revenue, and this move would be a very good initiative in checking the leakages. He further suggested that in order to improve efficacy of the proposal, following be also considered: - a. Benefit of reduced tax rate or rebate might be restricted to specified goods and services, while some of goods or services such as travel by rail and air, sale and purchase of cars, banking services etc. where significant digital penetration was already there, be kept out of this benefit. b. Benefit of reduced tax rate be raised to 4% with a ceiling of ₹ 200 per transaction, since ₹ 100 was a very low amount which may not attract the people. c. Some adjustment might be r....
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...., and added that Council should support the proposal. Hon'ble Minister from Chhattisgarh also supported the proposal and submitted that in his State, in the VAT regime, similar incentives were given, and this would bring down parallel economy. Hon'ble Minister from Uttar Pradesh also welcomed the proposal and stated that it had already been proposed in the agenda that the benefit of reduced tax would be limited to a maximum of ₹ 100 per transaction and perhaps there was no need for a negative list. He further stated that the proposal was practical and should be implemented. Hon'ble Minister from Tamil Nadu also supported the proposal and stated that there may be loss of tax revenue in short run. 16.6. Hon'ble Minister from Kerala stated that the stand of his State on this proposal remains the same as it was in the last meeting. He further said that he had discussed the issue with the traders in his State and 3 reasons have emerged based on which he does not support the proposal. a. When we brought GST, we had agreed on a principle that there should be no incentive or tax rebate relating to specific region, industrial segment, etc. and accordingly tax structure was ....
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....ere badly hit by demonetization. Moreover, the current proposal kept composition scheme of the incentive scheme. In his opinion, a large section of economy i.e. villagers and composition scheme dealers would be left out of the scheme and hence it was discriminatory. He further stated that now these sections of economy had started bouncing back and demand was recovering after demonetization, they should not be disturbed again. Secondly, nobody during the entire discussion so far, had pointed out about revenue loss on account of this proposal. 16.10. Hon'ble Minister from West Bengal explained further that as per the data in the agenda note, ₹ 900, 1200 and 1400 transaction size had been considered for estimating the revenue loss. He added that as per his observation, ₹ 1400 was a very small transaction size to estimate the loss, since all the transactions above it would also get the benefit and the estimated revenue loss would be approx. ₹ 26,500 crore (₹ 11,939 crore in Table 'A' and ₹ 14,885 crore in Table 'B') as per the data sheet enclosed. He further stated that all luxury and white goods seem to have been left out from calcula....
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....osal and termed it as progressive. Hon'ble Minister from Tripura stated that this would bring in a lot of transparency and make accounting easier leading to reduction in rural-urban divide. He further stated that the idea of increasing the upper ceiling of ₹ 100 per transaction and introducing a negative list might be reconsidered. 16.13. Hon'ble Minister from Manipur supported the proposal in principle and stated that his State had some practical difficulties such as limited network availability and coverage of only about 10-20% of the population by banking services. He added that to implement the proposal, network coverage in the North Eastern States had to be improved. He further stated that even after improvement of network coverage, there would still be problem of banking coverage and unless these two issues were addressed, this scheme would not succeed. 16.14. Shri Somesh Kumar, Principal Secretary (Revenue), Telangana stated that it did not seem to be a good strategy to link GST with digital payment and instead, there was a need to reduce MDR charges for encouraging people to use digital means. He added that if need be, some money could be allocated out of GS....
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....e Table 'A', he submitted that if the average transaction size of ₹ 1400 was taken and 40% of transactions were done digitally, then the revenue loss would be ₹ 11,939 crore as indicated in the agenda note Hon'ble Minister from West Bengal also stated that in his opinion, the proposed agenda seemed to be based on unsubstantiated and unresearched estimates and if there was any other research, which was not part of the Agenda note, the same could be shared: He further added that the entire estimate was based on transaction size of ₹ 1400 only, which was small as compared to transactions in medium and high value white goods and this revenue loss would then go up if these were added. The advantage of lower tax on digital transactions would go to-the people who already have the means to use digital payments. He summarized his arguments as follows: a. As far as revenue loss figures were concerned, the current figures did not seem to be complete and he would like to understand them better. b. There was no consideration as to what happens to rural people using cash and poor small traders, who do not have proper network in their areas. c. As submitted by ....
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.... proposal and wanted to fast digitalize their States, be allowed to adopt it and the States who did not find it a good proposal should not be forced to take the reduction in revenue due to this proposal. 16.22. Hon'ble Deputy Chief Minister of Bihar stated that so far as the question of discrimination is concerned, in rural areas, the traders were mostly below ₹ 20 lakhs and out of tax net and hence there would be no discrimination. He further stated that there was a need for reduced cash economy. He had discussed the proposal with traders in his State who were in support of this move. He proposed that in the beginning, the incentive limit could be fixed at maximum of ₹ 100 per transaction and going forward, it could be increased so that large number of people shift to digitization. Hon'ble Minister from Assam concurred with the proposal and stated that during demonetization period, when there were incentives for using cards, the tax revenues were higher. Further, he stated that it would be a small nudge from GST Council to people to transform from cash economy to digital economy and he urged all the Council members to support the proposal as it was not a reven....
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....n the year of excessive production of sugar, price of final product crashed whereas the price of raw material did not change, resulting in huge arrears on the part of mill owners to be paid to sugar cane farmers. To tide over this crisis, proposal before the Council was to allow a levy of sugar cess, which would be used mainly to clear the sugarcane procurement arrears of the mill owners to the farmers. 18.1. Second part of the proposal was regarding reduction in GST rates on ethanol from 18% to 12% for blending in petrol. He informed that during the discussion in the officer's meeting held the day before, some officers had observed that while there could be a case to reduce GST on ethanol for blending with petrol, it would not be advisable to reduce GST on ethanol for manufacture of alcoholic liquor for human consumption. Accordingly, the initial proposal was modified and as per the addendum, the proposal before the Council was for reducing GST rate from 18% to 12% only on the ethanol supplied to Oil Marketing Companies for blending with petrol. He further informed that, though, it was an end used based concession, the probability of its misuse would be minimal, as the benefi....
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....market was ₹ 2600 per quintal. There was a loss even after selling molasses @ ₹ 40 to 50 per quintal. During 2014;15, 2015-16 and in 2016-17, ₹ 8.15 crore, ₹ 13.45 crore, ₹ 42.23 crore respectively was realised through sugar cess (total ₹ 63.83 crore) while in 2014 and 2015, for the revival and modernization of sugar industry, the State got loan of ₹ 77.37 crore and ₹ 69.44 crore respectively at 12% interest rate. He submitted that State should get assistance for the modernization of sugar industry and providing assistance to sugarcane growers through the money realised from imposition of this cess. 18.4. The Hon'ble Ministers from Uttar Pradesh and Tripura also supported the proposal. Hon'ble Minister from Uttar Pradesh stated that using cess to pay farmers would be very good and State Governments should also have some say in this cess. Hon'ble Minister from Tripura stated that considering the cyclic nature of the sugarcane industry, 50 million sugarcane growers, 5 lakh sugar mill workers and other people dependent on the industry, imposition of this cess was welcome. He also supported the proposal for reduction of GST o....
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....diate steps were not taken during this year, then there could be a situation next year where production was affected due to mills going out of business and consumer price of sugar might go up substantially making consumers suffer more. Thus, in case of cyclical products, there was a need for some sort of stabilising mechanism and imposition of cess was one such way to stabilise at a price which might not be too good for consumers and not too bad for mill owners. Further, ₹ 3 per Kg was the maximum ceiling and the actual cess to be levied by the Government of India would depend upon the prevailing situation. 18.8. Shri Ravikant., Secretary, Food, Government of India, informed that the Government determined the price of sugarcane to be paid to the farmers and mill owners were obliged to purchase it. There was no control on price of sugar and there were huge variations year to year. This year, sugar production was around 300 lakh tonnes leading to glut in the market. Last year sugar production was only 200 lakh tonnes and due to shortage, prices went up drastically. The sugar prices were ₹ 26-28 per Kg currently, whereas the cost of production was above ₹ 30 per Kg.....
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....ould open a new window, where many other industries/sectors would come with demand to impose some cess for bailout. Hence, tradition of bailout package should not be started as it was against the principle of ' One Nation, One Tax' . 18.11. Hon'ble Chief Minister of Puducherry opposed imposition of cess on the grounds that / earlier cess was collected by the Government under the Sugar Cess Act and the same had been removed by Taxation Laws (Amendment) Act, 2017 with the aim of 'One Nation, One Tax'. By bringing cess on sugar, certain States would be benefited and certain States would be (affected badly. Consumers of States not having sugar mills would be compensating the other States. Hence, for benefit of some States, other States should not suffer. He further added that it was practically impossible for money going directly to the bank accounts of the farmers as list of farmers growing sugarcane was not available with Food Ministry. He said that ultimately with cess, sugar prices would increase and would add to the woes of the consumers already facing high prices for many commodities. 18.12. Hon'ble Minister from Kerala concurred with the views expressed....
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.... Council. 18.15. Chief Economic Advisor stated that the Council needed to make a distinction between objectives and instruments. The objective of helping sugar farmers was extremely important but current issue was regarding appropriate instrument to deal with this situation. He felt that use of GST was not appropriate as it undermines the sanctity and simplicity of GST. He added that the Council should not use tax instrument for every change of cycle of one particular commodity and national policy should not be distorted for few States. As regards proposal to reduce tax on ethanol, he stated that end use based tariff exemptions should be avoided as these would be prone to misuse. 18.16. Hon'ble Chairperson observed that as informed by Secretary Food, sugar price in market was around ₹ 26 to 28 per Kg, which was ₹ 5 below the cost price. In earlier regime, cess was normal because there was a gap between cost price and selling price and a mechanism had been developed so that the amount would go to the farmers directly. In the present circumstances, the Council would have to explore options that were available to deal with stress of lakhs of farmers spread in 10 Stat....
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.... packages, which would be against the principles of GST. He further added that Hon'ble Chairperson had been very impartial in maintaining the fundamental principles of GST and they needed to be maintained 18.18. Hon'ble Minister from Punjab suggested that instead of sacrificing the principle, GST rate on sugar might be increased from 5% to 12%, for a limited period say six months to one year. Secretary explained that the additional tax would be shared 50-50 between Centre the States and out of central pool, again 42% of the money would be devolved to the States leaving only 58% with the Centre. So, increased tax rate on sugar was not a correct proposal as consumers then would suffer more while less benefit would go to the farmers. Thus, to stabilise the price of sugar, the Council should consider putting some cess and use this cess for welfare of the farmers. Chief Economic Advisor stated that he was of strong view that GST should not be distorted and alternative ways like imposition of import duty on raw sugar and the money realised from this import duty might be utilised to help farmers. Secretary informed that import duty on sugar was already 100% and no import of sugar....
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....d powers to recommend cess. He stated that too much of politics was being seen behind the proposal and it was clouding the minds. 18.21. Hon'ble Minister from Assam stated that even though Assam was a poor State yet it was not opposing the proposal. Later on, when Assam faced floods, they would come to the Council for help. There could be a genuine argument on the quantum of cess, but to say that this was a distortion of GST and one State should not subsidize other States, would be a dangerous argument. It was not the spirit on which this Council had acted so far. There could be two opinions on an issue but the States should stand for each other at any cost. 18.22. Hon'ble Minister from Kerala stated that the question was not of cross-subsidy but that commercial crops in a number of States were in doldrums and his State Government was paying a direct subsidy e.g. ₹ 30-40 per Kg in case of rubber farmers. Hence, if the proposal of cess on all commercial crops was acceptable, sugar cess could be accepted. Hon'ble Minister from Assam responded that States were ready to subsidise Kerala if it helped the farmers of Kerala; but for that, a rubber cess or jute cess pro....
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....p the sugarcane farmers, there could be number of ways to raise revenue and the Council could try to identify them. He suggested that a small Committee could be formed to find resources, which were least distortionary to GST and cause least inconvenience to the consumers. Hon'ble Minister from Assam stated that putting cess was not a distortion of GST. Chief Economic Advisor clarified that he was not challenging the legal powers of the GST Council but only advising that there were better ways of raising required resources. 18.26. Hon'ble Chairperson observed that based on discussions, 3 scenarios were emerging. First and immediate problem was in 10 States involving large number of cane growers; second was relating to some other member States, which had similar problem in relation to other crops; and the third was similar potential problem~ arising in future. The problem demanded that the Council should create some form of a flexibility or an alternative system through which such temporary impasse could be addressed. Thus, the issue for consideration was that whether there was a way out of it or the situation should be allowed to deepen. He added that the present situation ....
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....uncil debated at length whether it was better to have cess or additional GST. Thus, the cess imposition was not a distortion when it benefited States but, in this situation, all were advising that Govt. of India should bear the cost. He stated that the Government of lndia would have suffered big indirect tax loss last year but for IGST balance available. There was no mechanism for absorbing shock of GST for Central Government and no guarantee was given to Govt. of India by anyone. He added that when cess on 11 commodities was already there, if one more commodity was added to the cess basket, and this kitty used only for specific purpose, he did not see anything wrong in it. Further, consumers could easily bear the increase and it would be collected at single point. He reiterated that it was good for the future economic growth, welfare of the consumers and sugarcane farmers. In future, if some other commodity comes, GST Council could debate and decide. He strongly suggested that the Council should approve the proposal. 18.29. Hon'ble Minister from West Bengal stated that compensation cess was for a different purpose whereas the proposed cess on sugar could not be a part of it. ....
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....t would be accepting or rejecting every such proposal. Hon'ble Minister from West Bengal reiterated that the proposal was not acceptable to him on fundamental principles. 18.31. Hon'ble Minister from Uttarakhand stated that the issue should be considered sympathetically. He stated that presently the cost price of sugar is ₹ 4990 per quintal, whereas the sale price including molasses sale was not more than ₹ 3000 per quintal, and it was a near disaster situation. He added that there had been many amendments in the Constitution and when the Council was empowered to impose cess, it should be imposed rather than making a political issue out of it. He requested that the proposal should be approved by the Council as it was a question relating to the farmers who would stop growing sugarcane. 18.32. Hon'ble Chief Minister of Puducherry stated that there were sharp differences among States as far as raising money for sugar industry was concerned. He agreed with the need to help sugarcane farmers but the method of raising resources was not correct as increasing sugar price would affect common man. He proposed that already cess system existed in Income Tax and money ....
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....the States would have extra money to be used in the budgetary process. Chief Economic Advisor stated that it was agreed that money was needed for sugarcane farmers and national efforts were required to raise ₹ 6700 crore. He suggested that instead of raising money from sugar consumers, the Centre and States. could raise other taxes, e.g. Tax on alcoholic beverages. Thus, 3-4 ministers of sugar producing States and some other States could sit together and come up with 3-4 ideas on the issue. Hon'ble Minister from West Bengal stated that data wise, it was not correct that the crisis situation was there in 10 States. As per his calculations, the situation was bad only in 5 States viz, Uttar Pradesh, Maharashtra, Tamil Nadu, Karnataka and Andhra Pradesh and out of them, Tamil Nadu had opposed it, while Karnataka had not said anything. Hon'ble Deputy Chief Minister of Gujarat stated that Gujarat was also a large producer of sugar. Hon'ble Minister from West Bengal stated that even then, it was 6 States and not 10 States. 18.36. Hon'ble Chairperson concluded by stating that he did not want to link the issue with Karnataka elections as suggested by Punjab. Secondly,....
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....been incorporated in the proposed new model wherein during the transitional period, provisional credit will continue to be available for six months or so but will eventually go away. With respect to the recovery of tax, the first effort would be made to recover from the seller but only in special circumstances such as missing seller or seller without any assets, the buyer's credit would be reversed. Apart from these, other points that were common in both the models have been retained. 20.2. The new return design envisaged one return per month for all the dealers except 'nil' filers and composition dealers who would continue to file quarterly return. The document flow and upload would be uni-directional. The transition from old return to new return system would be in 3 stages. The total information which was being collected in return would be rationalized and overall, it would be a very simple return filing system. 20.3. Hon'ble Deputy Chief Minister of Bihar stated that during several rounds of deliberations in the GoM and discussion with stakeholders on 17.04.2018, two different views had been integrated in the fusion model. The consensus had emerged to do away w....
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....would remain with the seller. If the seller did not pay the taxes, the State concerned following due process of issuing notice and adjudication etc. can recover the tax from the seller. However, where ultimately the seller did not pay the tax, the purchaser is not absolved of the responsibility to pay tax in the proposed model. Thus, the first responsibility of paying taxes would remain with the seller but responsibility remained with the buyer also in case the seller did not pay the tax. He added that no major change in law was required. In order to achieve simplicity in return filing, the new model proposed to do away with the automatic reversal process and it would be notice-based. The notice and reply would be handled through the system and with the introduction of new model, the credit flow would not be affected. He stated that in the new model, there would be a mechanism that if a seller defaults in payment of huge sum of tax after uploading the invoice, his further online uploading of invoices in the next month would be prevented. The Hon'ble Minister from West Bengal stated that in case of inter-State sales, if the seller defaulted in the originating State, it might not....
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.... basis during the month, which would be the valid document to avail input tax credit by the buyers. Buyer would also be able to continuously see the uploaded invoices during the month but there would not be any need for him .to upload his purchase invoices. Invoices for B2B transaction shall need to use HSN at four-digit level or more to achieve uniformity in the reporting system. iii. The B2B dealers shall fill invoice wise details of the outward supply made by them while the input tax credit would be calculated automatically by the system based on invoices uploaded by his sellers. Based on these, the system would automatically calculate his tax liability and Input Tax credit availability. Taxpayer should also be given user friendly IT interface and offline IT tool to upload the invoices. iv. There would not be any automatic reversal of input tax credit from buyer on non-payment of tax by the seller. In case of default in payment of tax by the seller, recovery shall be made from the seller; however, reversal of credit from buyer shall also be an option available with the revenue authorities to address exceptional situations like missing supplier, closure of business by supplie....