TaxTMI 
TaxTMI 
Minutes of the 9th GST Council Meeting held on 16 January 2017
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....f Cross-Empowerment to ensure Single Interface under GST 4. Discussion on issues of considering sale within twelve nautical miles as interstate or intra-state sale 5. Date of the next meeting of the GST Council 6. Any other agenda item with the permission of the Chairperson 3. In his opening remarks, the Hon'ble Chairperson welcomed all the Members. He recalled that during the last meeting of the Council, the Hon'ble Minister from Bihar had suggested that Council should also hear the representatives of the Power Sector as electricity was very important to the common people. He stated that, accordingly, the representatives from the Power Sector had been invited to make a presentation before the Council. Discussion on Agenda Items Agenda Item 1: Brief presentations by representatives of Power Sector- 4. The Hon'ble Chairperson invited the representatives of the Power Sector to make a brief presentation on the impact of GST on Power Sector. 4.1 Shri Pradeep Kumar Pujari, Secretary, Ministry of Power, in his introductory remarks, stated that implementation of GST would have an impact on the cost of generation, transmission and distr....
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....this scenario was not possible due to revenue implication and if electricity was kept out of the GST net, the cost per unit of power for plants in operation would be Rs. 7.01 if coal was taxed at the rate of 12% and other inputs were taxed at the rate of 18%. He added that this cost could come down to Rs. 6.93 if coal was taxed at the rate of 5% while other inputs continued to be taxed at the rate of 18%. He further stated that for the new plants, the cost per unit of power for the above two scenarios would be Rs. 7.04 and Rs. 6.97 respectively. He stated that this calculation excluded the electricity duty levied by the States. The Secretary, Ministry of Power stated that if electricity could not be zero rated under GST, the best option was to tax coal at the rate of 5% and other inputs at the rate of 18%. 4.3 Dr. Somit Dasgupta then discussed the impact of GST taxation on hydro power plants. He stated that in the present tax regime, the cost of power per unit from hydro power plants was Rs. 7.42 and in GST regime, it would go up to Rs. 7.46 per unit for plants under operation and Rs. 7.61 for new plants, if inputs were taxed at the rate of 18%. The Secretary, Ministry of Power ....
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....but not for the hydro power sector. He also pointed out that electricity sector was different from the sectors like transport, civil aviation, etc. as this was consumed by the poorer sections of the society and the aim of the Government has been to electrify every home. The Secretary, Renewable Energy observed that permitting zero rating for this sector would not have any impact as presently they were not charged to any taxes. The Hon'ble Minister from Tamil Nadu observed that tax rate should be revenue neutral. He also wondered whether increase of tariff was due to tax rate on services going up to 18% for EPC (Engineering Procurement and Construction) contracts. He also observed that this could be addressed if tax could be charged at a lower level for goods to maintain a revenue neutral situation. 4.6 The Hon'ble Chairperson thanked the presenters and observed that their inputs would be taken into account by the committee of officers discussing fitment of goods and services in the different tax rate slabs. Agenda Item 2: Confirmation of the Minutes of the 8th GST Council Meeting held on 3-4 January, 2017: 5. The Hon'ble Chairperson invited comments of the Memb....
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....at some of these issues had direct bearing on the issue of dual control and cross-empowerment. He proposed that these issues should be discussed first such as the 13 changes to the Model GST Law proposed by the Law Committee and circulated as an agenda note under agenda item 7 for the 8th GST Council meeting held on 3 and 4 January 2017, the provisions of Appellate Tribunal and the fitment of various commodities into the tax slabs. He suggested that the subject of cross-empowerment might be taken up after discussing and deciding the above issues. The Hon'ble Chairperson stated that the issues relating to the Model GST Law could be taken up later and that in this meeting, the Council should try to resolve the thorny issue of cross-empowerment. He invited the Chairman, Central Board of Excise and Customs (CBEC) to give his views on this subject. He further stated that along with the Members, officers could also contribute in the discussion to follow. 8. The Chairman, CBEC observed that cross-empowerment in the context of Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) was envisaged to facilitate trade and to ensure maximum utilisation of resources....
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.... of the Chairman CBEC. 9. The Hon'ble Minister from Kerala stated that the proposal changed the entire complexion of the issue and he requested that a written proposal be presented. The Hon'ble Minister from Tamil Nadu also requested for a written proposal. He stated that the Central tax administration could conduct audit of 20% of the taxpayers below the turnover of Rs. 1.5 crore, and 50% of taxpayers above the turnover of Rs. 1.5 crore. As regards suggestion for carve out for exclusive jurisdiction of the Centre for adjudication on place of supply issues, he suggested that this should apply only where there was a dispute between two States. The Chairman CBEC suggested that carve out for the Central tax administration should be for all place of supply issues including where a third State was aggrieved or where there was a valuation challenge for an inter-State supply. 10. The Hon'ble Chief Minister of Puducherry stated that earlier, several permutations and combinations had been discussed on this issue including a proposal of vertical division. He added that an entirely new concept had been introduced by the Chairman, CBEC and requested that it should be tabled i....
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....lso requested to give examples regarding problems relating to place of supply which only the Central tax administration should adjudicate. The Hon'ble Minister from West Bengal stated that earlier, five options were on the table and that during -the Empowered Committee meetings, there was unanimity on Option II. He observed that now a new, sixth option was proposed which was not very clear and required greater specificity. He suggested that the proposal be put in writing. He also stated that the amount of revenue and the total number of taxpayers would need to be looked into. The Hon'ble Minister from Tamil Nadu stated that the sixth option was also discussed earlier but its one component, namely, that 5% auditable sample should be divided equally between the Central and the State tax administration was rejected outright as the percentage of intervention above Rs. 1.5 crore would have exceeded 5%. Instead, he suggested that the auditable sample should be 5% each for taxpayers below and above Rs. 1.5 crore turnover. He also agreed that neither the Central Government nor the State Government should be ousted from any jurisdiction. He stated that 42 lakh taxpayers with turnove....
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....was not done, there would be lack of accountability. He supported a vertical division. The CCT, Bihar supported the suggestion of Chairman, GSTN that a tax payer should report to the same authority to whom he was reporting presently and a tax payer who had an overlap between two tax administrations, could be given a choice to be assigned to one of the two tax administrations. CCT, Telangana supported a vertical division in a pre-defined ratio so that all tax-payers had one interface. He suggested that division should be done randomly by the computer. 14. After the lunch break, as per the demand made by some Members, the CBEC circulated a document outlining the broad principles for cross-empowerment of the State tax authorities under the IGST Act. In the paper, it was stated that CBEC was of the view that adjudication of the IGST could not be cross-empowered due to Constitutional impediments. It was further stated that if the Ministry of Law was able to find some legally viable method of delegation of adjudication in terms of Council's decision, then States might be empowered for the specified functions. The paper further stated that States might audit, scrutinise return /ass....
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....on the Ministry of Law being able to find a viable legal solution. The Hon'ble Chairperson stated that CBEC had taken a strict legal view that IGST could only be levied and collected by the Central tax administration and apportioned to the States. He pointed out that there was another view that under Article 258 of the Constitution, the Hon'ble President of India, with the consent of the Hon'ble Governor of the State, could entrust the function of the Central administration to the State administration. The Hon'ble Minister from Karnataka stated that another alternative was to delegate the entire task of administration to the States as was done under the Central Sales Tax(CST) Act under Article 269 of the Constitution. Dr. C. Chandramouli, ACS and CCT, Tamil Nadu pointed out that the Preamble of the CST Act provided for levy, collection and distribution of taxes for inter-State trade and commerce. He added that Section 9(2) of the CST Act permitted State tax administration to assess, re-assess and collect tax on behalf of the Government of India and emphasised that this delegation was given under the CST Act itself. The Hon'ble Chairperson observed that once the ....
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....rala stated that tax payers with turn over below Rs. 1.5 crore should be exclusively with the State tax administration and those above the turnover of Rs. 1.5 crore should be divided equally between the two administrations. He further stated that there should be cross-empowerment under the IGST Act. Shri Alok Shukla, Joint Secretary TRU, CBEC stated that like States had concern regarding ensuring correctness of assessment of IGST and wanted powers under the IGST Act, the Central administration must also have a say on the collection of CGST for tax payers with turn over below Rs. 1.5 crore. He added that the Centre's jurisdiction for enforcement, audit and scrutiny of returns should not be completely ousted in respect of taxpayers below Rs. 1.5 crore turnover segment but the other functions could be carried out by the States. He also suggested that for tax payers below Rs. 1.5 crore turnover, Centre's intervention could be limited to 1% within the overall cap of 5%. The Hon'ble Minister from Tamil Nadu observed that this construct was not workable as one was talking of two universe of tax payers - one with turnover below Rs. 1.5 crore and the other with turnover above Rs....
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....n this taxpayer base. 20. The Hon'ble Minister from West Bengal observed that in the goods segment, as per their calculation, the Centre was overall gaining approximately 23.54 lakh taxpayers and that the States were gaining approximately 17.07 lakh taxpayers in the services segment. He therefore strongly argued that all taxpayers below Rs. 1.5 crore should be with the State tax administration and that the Central administration should not take up audit of 10% of the taxpayers in this segment. The Hon'ble Minister from Kerala stated that the State tax administration was closer to small dealers in the administrative reach and he agreed that the Centre could have a small space for auditing taxpayers falling below the turnover limit of Rs. 1.5 crore and that this sample could be drawn from the entire taxpayer base below Rs. 1.5 crore turnover. The Hon'ble Minister from Maharashtra reiterated his preference for a vertical division with two-third share going to the States from the entire value chain and suggested that a variation of this principle might be allowed for those States who wanted to have exclusive control of taxpayers below Rs. 1.5 crore turnover. He added tha....
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....urnover. The Principal Secretary (Revenue), Telangana suggested an alternative that the present Central Excise and Service Tax assessees with turnover below Rs. 1.5 crore could be continued with the Centre for the next three years. The Hon'ble Minister from West Bengal observed that this formulation had already been rejected earlier. The Hon'ble Minister from Tamil Nadu pointed out that it would be a challenge to identify taxpayers on the basis of supply of goods and services. The Hon'ble Chief Minister of Puducherry stated that the Central Government' would need to create additional infrastructure if it got more taxpayers under its jurisdiction and therefore supported the proposal of the Hon'ble Minister from Tamil Nadu. 22. The Hon'ble Chairperson summed up the suggestions and the possible solutions: (i) there should be a vertical division of taxpayers where two-third share should go to the States and one-third share should go to the Centre (Gujarat's suggestion); (ii) for taxpayers below Rs. 1.5 crore, the administrative control should vest with the States and only 10% of units to be audited by the Central tax administration (Tamil Nadu's propo....
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....inistration should be left with the States alone. 24. The Secretary informed that in the officers' discussion during the lunch break, all State Governments expressed a preference of a vertical division of the taxpayers. He stated that there were approximately 26 lakh taxpayers between the turnover of Rs. 20 lakh to Rs. 1.5 crore, and if 20% was given to the Centre, about 5 lakh taxpayers would be with the Centre and 20 lakh taxpayers would go to the States. He further stated that taking approximately 14 lakh taxpayers above the turnover of Rs. 1.5crore, and doing an equal division, 7 lakh taxpayers each would fall in the jurisdiction of the Central and State tax administrations. He stated that in total, about 12 lakh taxpayers would fall within the jurisdiction of the Centre and about 27 lakh would fall within the jurisdiction of the States and this broadly conformed to the formula of one-third taxpayers being allocated to the Centre and two-thirds to the States. The Hon'ble Minister from Maharashtra reiterated that regional variation should be permitted for administrative division of taxpayers. The Hon'ble Chairperson observed that States had historically taken a ce....
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....ty for West Bengal that 100% of its taxpayers below Rs. 1.5 crore turnover would remain with the State. The Hon'ble Chairperson stated that broadly, the concern of the States was that the Central tax administration should not scrutinise the books of account of small taxpayers in the goods sector and one solution to this concern could be that the 20% taxpayers allocated to the Centre should only be from the Service Tax assessee base. The Hon'ble Minister from Assam strongly supported this proposal. The Hon'ble Minister from West Bengal reminded that there was a unanimous decision of the Empowered Committee of State Finance Ministers on this subject and it needed to be respected. The Hon'ble Minister from Haryana stated that the decision of the Empowered Committee was taken on the basis of certain inputs but now many more factors had to be taken into account to arrive at a decision. The Hon'ble Minister from Tamil Nadu stated that he agreed to the suggestion that 10% taxpayers below Rs. 1.5 crore turnover be allocated to the Centre in order to reach an agreement on cross-empowerment under IGST. The Hon'ble Minister from Assam reminded that the division of IGST....
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.... and stated that this amounted to voting in disguise. He also reminded the House that earlier on many occasions the sense of the House was not adopted as the basis of consensus and on this issue, no sense of the House had emerged as yet. The Hon'ble Chairperson observed that the Council had avoided voting till now and it must continue to work on the principle of consensus and develop a healthy convention in this regard. The Hon'ble Minister from Tamil Nadu stated that he had changed his position and now supported a vertical division with two-third of taxpayers going to the States and one-third to the Centre. The Hon'ble Chairperson stated that in order to reach consensus, he offered that of the taxpayers below Rs. 1.5 crore turnover, 90% should be allocated to the States and 10% to the Centre. He invited the Hon'ble Minister from West Bengal to join the emerging consensus on the basis of this revised proposal. However, the Hon'ble Minister from West Bengal stated that he was unable to join the consensus as he was still of the view that the entire taxpayer base below the turnover of Rs. 1.5 crore should fully remain in the administrative jurisdiction of the State....
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....ssues of export and import as may be discussed in the Law Committee of officers and brought back to the Council for decision; x. The territorial water within the twelve nautical miles shall be treated as the territory of the Union of India unless the Hon'ble Supreme Court decides otherwise in the ongoing litigation on the issue but the power to collect the State tax in the territorial waters shall be delegated by the Central Government to the States. Agenda Item 4: Discussion on issues of considering sale within twelve nautical miles as inter-state or intra-state sale 29. This agenda item was covered during the discussion on agenda item 3. Agenda Item 5: Date of the next meeting of the GST Council 30. Before discussing the next date of the meeting, the Council briefly discussed the date Of implementation of GST. The Hon'ble Minister from Maharashtra suggested that GST should be implemented from l" April, 2017. The Hon'ble Minister from Assam stated that it was not desirable to change the tax regime in the middle of the financial year and suggested that it should be implemented from 1st April, 2017. The Hon'ble Minister from Kerala stated that th....
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....out to 1st July, 2017. 31. After discussion, the Council agreed that its next meeting would be held on 18 February 2017 .. 32. The meeting ended with a vote of thanks to the Chair. (Arun Jaitley) Chairperson, GST Council ============= Document 1 WRITEAWAY MINUTE BOOK Annexure 1 List of Ministers who attended the 9th GST Council Meeting on 16 January 2017 S No State/Centre Name of the Minister Charge 1 Govt. of India Shri Arun Jaitley Finance Minister 2 Govt. of India Shri Santosh Kumar Gangwar Minister of State for Finance 3 Puducherry Shri V. Narayanasamy 4 Gujarat Shri Nitinbhai Patel 5 Assam 6 Bihar 7 Haryana 8 Himachal Pradesh 9 Jharkhand 10 Karnataka 11 Kerala Dr. Thomas Issac Dr. Himanta B. Sarma Shri Bijendra Prasad Yadav Captain Abhimanyu Shri Prakash Chaudhary Shri Amar Kumar Bauri Shri Krishna Byregowda Chief Minister Deputy Chief Minister Finance Minister Minister, Commercial Taxes Minister, Excise & Taxation Minister, Excise & Taxation Minister, Revenue Minister for Agriculture Finance Minister 12 ....
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.... Additional PS to FM Additional Secretary Commissioner Page 18 of 23 WRITE A WAY MINUTE BOOK S No State/Centre Name of the Officer Charge 24 GST Council Shri Manish K Sinha Commissioner 25 GST Council Shri G.S. Sinha 26 GST Council Ms. Thari Sitkil 27 GST Council Shri Rakesh Agarwal Joint Commissioner Deputy Commissioner Assistant Commissioner 28 GST Council Shri Kaushik TG 29 GST Council Shri Sandeep Bhutani Assistant Commissioner Superintendent 30 GST Council Shri Shekhar Khansili Superintendent 31 GST Council Shri Manoj Kumar Superintendent 32 GST Council Shri Amit Soni Inspector 33 GST Council Shri Alok Bharti Inspector 34 GST Council Shri Anis Alam Inspector 35 GST Council Shri Ashish Tomar Inspector 36 GST Council Shri Sharad Kumar Verma PA to Commissioner 37 GST Council Shri Sher Singh Meena 38 Andhra Pradesh Shri J. Syamala Rao 39 Andhra Pradesh Shri T. Ramesh Babu Tax Assistant Commissioner, Commercial Taxes Additional Commissioner, Commercial Taxes 40 Andhra Pr....
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....gotia Shri L. Khongsit Page 20 of 23 Private Secretary to the Minister Joint Commissioner, Commercial Taxes Assistant Commissioner, Commercial Taxes Commissioner, Commercial Taxes Additional Chief Secretary (Taxes) Commissioner, Commercial Taxes Commissioner, Commercial Taxes Deputy Commissioner Commissioner, Sales Tax Joint Commissioner, Sales Tax Commissioner, Taxes Assistant Commissioner, Taxes WRITEAWAY) MINUTE BOOK Shri G. Srinivas Shri Satish Chandra S No State/Centre Name of the Officer 76 Mizoram Shri K.S. Thanga 77 Mizoram Shri Umakant 78 Mizoram Shri L.H. Rosanga 79 Mizoram Shri R. Zosiamliana 80 Nagaland Shri Asangba Chuba Ao 81 Odisha Shri Tuhin Kanta Pandey 82 Odisha Shri Saswat Mishra 83 Odisha Shri Sahadev Sahu 84 Puducherry Dr. V. Candavelou 85 Puducherry 86 Punjab 87 Punjab Shri Rajeev Gupta 88 Punjab Shri Varun Roojam 89 Punjab Shri Kumar Saurabh 90 Sikkim 91 Rajasthan 92 Rajasthan 93 Rajasthan 94 Tamil Nadu Dr. C. Chandramouli 95 Tamil Nadu 96 Telangana 97 Telangana 98 Te....