TaxTMI 
TaxTMI 
Minutes of the 32nd GST Council Meeting held on 10th January 2019
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....) for information of the Council 4. Interim Report of GoM (Group of Minister) on MSMEs 5. Issues recommended by the Fitment Committee for the consideration of the GST Council i. Proposal for boosting real estate sector under GST regime by providing a composition scheme for residential construction units ii. Proposal regarding rationalisation of GST rates on Lottery iii. Request by CAPSI (Central Association of Private Security Industry) to bring the entire security services sector including body corporate under RCM (Reverse Charge Mechanism) 6. Issues recommended by the Law Committee for the consideration of the GST Council i. Notification of provisions of the CGST (Amendment) Act, 2018; UTGST (Amendment) Act, 2018, the GST (Compensation to States) Amendment Act, 2018 and the IGST (Amendment) Act, 2018 ii. Consequential amendments in notifications issued earlier in light of bringing into force the provisions of the CGST (Amendment) Act, 2018; the UTGST (Amendment) Act, 2018; the GST (Compensation to States) Amendment Act, 2018 and the IGST (Amendment) Act, 2018 iii. Consequential amendments in Circular....
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....al estate sector under GST regime by providing a composition scheme for residential construction units), 5(ii) (Proposal regarding rationalisation of GST rates on Lottery), 8 (Allowing ITGRC to consider non-technical issues), and 11 (Report of GoM on Revenue Mobilisation) were placed before the Council in pursuance of the decision of the last Council Meeting to discuss these issues in a combined meeting of the Fitment Committee and the Law Committee or in the GoM and place the recommendations in the next meeting of the Council. He added that the only new substantive agenda was Agenda item 9 (Use of RFID data for strengthening enforcement of e-Way bill system under GST) which was discussed during the Officers meeting held on 9^th January, 2019 and the Council would be apprised about its deliberations when this Agenda item came up for discussion. 3.2. The Hon'ble Chairperson observed that there should be a procedure by which any pressing issue raised by a State may be brought before the Council. He stated that the Hon'ble Minister of a State could write to him or the Finance Secretary of the State concerned could write to the Union Revenue Secretary. The Hon'ble Minist....
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....the IGST amount could be kept as nil as collections and refunds would happen right till end of March. Hence, some amount would always remain un-apportioned. The Secretary stated that in March, 2019 also, some IGST amount would come into the Consolidated Fund of India and refunds would be given, and the Government would come to know about the exact amount lying in the Consolidated Fund of India only at the end of March, 2019. He further stated that they were taking legal opinion as to whether the unsettled IGST amount could be kept in the Consolidated Fund of India and whether it was devolvable. He added that this issue was also under discussion with the accounting authorities of the Central Government before taking appropriate decision. 3.6. The Hon'ble Chairperson observed that since the two Union Territories with legislature were not getting any money through devolution, their request to keep only a minimal amount under the IGST head would need to be examined. The Hon'ble Deputy Chief Minister of Delhi stated that an in-principle decision should be taken now that Union of India should keep only a minimal amount under the IGST head as this might be the last meeting of t....
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....trike through mode): 'On Service Tax, he stated that earlier, a large part of Service Tax was levied on B2B supplies i.e. between the stages of manufacture and retail like renting of immovable properties, C&F agent, business auxiliary service, business support service, advertisement, etc. and the revenue from them was going to be cannibalized in GST, being a levy on the final price. He stated that as per his estimate, the net revenue from Service Tax was supposed to be around Rs. 70,000 crore depending upon the exemption threshold.' (iii) In paragraph 12.20 of the Minutes, to make corrections in the first six sentences as follows (the suggested changes are in italics and underlined and suggested deletions are in strike through mode): 'The Advisor (Financial Resources), Punjab, further stated that at the time GST design was first conceived around 2008 the rate of State VAT was standard rated @12.54% and merit rate was 4% but the rates varied rose subsequently among the across the States as some States started levying 10% surcharge, some raised tax rates etc. At the time GST was ushered. Most States had a tax VAT rate of 13.5%-14% on a cascaded value, which included Ce....
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.... of 2018 Circulars Under the CGST Act 76 to 81 of 2018 and 82 to 86 of 2019 ROD Orders Under the CGST Act 2 to 4 of 2018 7.1. The Notifications, Circulars and Orders issued by the States, which are pari materia with the above Notifications, Circulars and Orders, were also deemed to have been ratified. Agenda Item 3: Decisions of the GST Implementation Committee (GIC) for information of the Council 8. Introducing this Agenda item, the Secretary stated that the GST Implementation Committee (GIC) took one decision between 22^nd December, 2018 (when the 31^st GST Council Meeting was held), and 2^nd January, 2019 (before the 32^nd Council Meeting). The decision related to a provisional settlement on ad hoc basis of IGST amount to the tune of Rs. 18,000 crore between the Centre and the States. The GIC had agreed to the proposal to settle this additional IGST amount, 50% to the Centre and 50% to the States, on ad hoc basis. He stated that this Agenda item was discussed during the Officers meeting held on 9^th January, 2019 (presentation on the issue attached as Annexure 3 to the Minutes) and there were no comments from the Officers. He stated that this....
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....avail the benefit of this scheme, the Joint Secretary, TRU-ll stated that about one lakh new taxpayers were likely to take benefit of the increase in annual turnover threshold under the Composition scheme from Rs. 10 crore to Rs. 1.5 crore. 10.3. Shri Krishna Byre Gowda, Hon'ble Minister from Karnataka, stated that from the figures indicated in the presentation, it appeared that when the annual turnover threshold for availing the Composition scheme was Rs. 1.0 crore, only 22% of the eligible taxpayers had availed the Composition scheme. He further stated that the proposed increase in the annual turnover threshold for Composition taxpayers now being made was meant to address the grievance of the MSME sector. However, as only 22% of the eligible taxpayers had availed this Scheme, it was clear that this facility was not relieving the sufferings of the bulk of the MSME units. He added that their suffering was more due to compliance burden and not composition or regular rate of tax. He added that the proposed increase in the annual turnover threshold might not solve the problem of the small taxpayers. He stated that while he was not opposed to this proposal, he wanted to put this....
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....Karnataka reiterated that businesses wanted to stay in the tax chain as there were benefits for the same and as such there was a need to simplify compliance requirements. The Hon'ble Chairperson stated that the organised sector of business was, by and large, at ease with the GST system, but the small businessmen were finding it burdensome. Therefore, the smaller businesses may require to be offered multiple avenues of simplified system to reduce the compliance burden on them. He suggested that the Council could agree to this recommendation of GoM. The Council agreed to the same. ! 10.7. The Council agreed to the proposal to simplify the Composition scheme by providing for quarterly payment of tax and filing of only one return in a year with effect from 1^st April 2019. The Law Committee to design a tax payment declaration with details necessary for compliance verification and also to suitably amend the FORM GSTR-4 and to place it before the Council. (III) Increasing threshold exemption for suppliers of goods 10.8. The Joint Secretary, TRU-ll introduced the third recommendation of GoM regarding increasing exemption threshold for supplier of goods for registration up to ....
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.... regular taxpayers would be theoretically about 50% of the total revenue and similarly, the number of taxpayers who would go out of the GST net would be theoretically about 50% of the total number of taxpayers. Taking these presumptions into consideration in favor of the revenue, he stated that in the worst-case scenario, the total annual revenue that could be impacted would be about Rs. 5,225 crore if the annual turnover threshold for registration for supplier of goods was increased to Rs. 40 lakh; it would be Rs. 6,450 crore and 9,200 crore respectively if the annual turnover threshold for registration for supplier of goods was raised to Rs. 50 lakh and Rs. 75 lakh respectively. The total number of taxpayers expected to go out of the GST net would be about 20,64,000 if the annual turnover threshold was increased to Rs. 40 lakh; the number would be about 21,91,000 and 23,81,000 if the threshold was increased to Rs. 50 lakh and Rs. 75 lakh respectively. 10.11. The Joint Secretary', TRU-ll further stated that the fundamental argument for raising the threshold was that it would free the business of its expenditure which went into compliance. He informed that the taxpayers with....
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....t the threshold limit of services should not be raised because in services, there was considerable revenue involvement even at the lower threshold base. He further stated that the operational details for differential thresholds for goods and services could be worked out by the Law Committee. He stated that the implementation of the proposal might require amendment in the GST Law but alternatively, it could be done by the exemption notification as well. 10.13 . Starting the discussion on this issue, the Hon'ble Minister from Kerala observed that the Council had already agreed to raise the annual turnover threshold for Composition taxpayers to Rs. 1.5 crore, charged a reduced tax and had simplified the compliance burden by deciding to take only one return in a year from them. As the compliance cost for MSMEs had been taken care of fully, there was no need to increase the annual turnover threshold for registration as this would undermine the architecture of GST. He observed that the broad philosophy of GST is to keep the tax rate low and to widen the tax base. In order to maintain self-policing nature of GST, input tax credit should be available at each stage of transaction. If....
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....in increasing the threshold, there would be problem for smaller States like theirs. He added that his State was already suffering a severe revenue shortfall because the revenue coming from the consumers of the adjoining States had gone due to equalization of rates of tax across the States under GST. He suggested that the Council should wait for some time before thinking of increasing the annual turnover threshold for registration and take a call once the revenue position had stabilized. He stated that increasing the annual turnover threshold for registration would lead to splitting of units and large-scale tax evasion. 10.16. Shri Mauvin Godinho, Hon'ble Minister from Goa, stated that while he would have normally welcomed the decision of raising the turnover threshold for registration, but the State of Goa would serve as a classic example for deciding on the particular agenda. He stated that if the annual turnover threshold for registration was increased from Rs. 20 Iakh to Rs. 50 lakh, his State would suffer a revenue loss to the extent of 30% and if the registration threshold was increased to Rs. 75 lakh, his State would suffer a revenue loss of 40%. He stated that while d....
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.... as a result of raising the threshold from Rs. 40 lakh to Rs. 50 lakh was not very high. He observed that the background for the suggestion to increase the annual turnover threshold for registration was based on the erstwhile Excise Duty structure under which manufacturers up to an annual turnover of Rs. 1.5 crore were exempted from Central Excise Duty. He added that the small manufacturers were most affected, and therefore, increasing the annual turnover threshold for registration to Rs. 40 lakh or Rs. 50 lakh would not result in significant revenue loss but would take out a large number of taxpayers from the GST net. He added that for Goa and other smaller States, one could think of a separate scheme. He further stated that even if the annual turnover threshold was increased, all the taxpayers covered within the new threshold might not go out of the tax net as many would like to continue with their registration for availing input tax credit, etc. and only 50% of the taxpayers were likely to go out of the tax net. He, therefore, suggested to raise the annual turnover threshold for registration to either Rs. 40 lakh or Rs. 50 lakh. 10.20. The Hon'ble Minister from Kerala sta....
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....gistration for goods was to be raised to Rs. 40 lakh, there should also be a provision in law to allow supply of services by such units up to 10% of the value of turnover of goods. He also suggested to create certain safeguards, like there should be only one PAN card for every registered taxpayer. He also suggested that there should be a negative list of goods, like pan masala, tobacco, ice cream, etc., which need not be given the benefit of increased turnover threshold for registration. He further cautioned that any increase in the turnover threshold for GST registration could also affect income tax collection. He added that if the annual turnover threshold had to be increased, then the Council should also have a retook at the distribution of taxpayers between the Centre and the States, as a large number of small taxpayers would go out of the tax net. 10.24. Capt. Abhimanyu, Hon'ble Minister from Haryana appreciated the work done by the GoM on MSMEs and lauded its recommendations. He suggested that the annual turnover threshold for registration could be increased to Rs. 50 lakh, though his State was ready to adopt even a higher threshold. The Hon'ble Chief Minister of P....
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....n this issue, should be respected. He added that one needed to remind oneself that the idea behind GST was to broaden the tax base, but the Central Government seemed to be now going away from this position. 10.27. Dr. Himanta Biswa Sanna, Hon'ble Minister from Assam, stated that though his State was a Special Category State, he was mindful that during the Central Excise regime, the annual turnover threshold for registration was Rs. 1.5 crore and small units were suffering under GST regime. He observed that employment was key to everything. He added that initially the bigger States wanted registration threshold to be Rs. 40 lakh so that MSMEs did not suffer adversely but the decision was to keep it at Rs. 10 lakh and Rs. 20 lakh and in the process, the MSME had suffered losses because in the Central Excise regime, their exemption threshold was Rs. 1.5 crore. He added that this aspect should be considered with a view to ameliorate the adverse impact of GST on MSME Sector to boost the employment opportunities. In view of this, he suggested that the annual turnover limit for registration of MSMEs in GST could be kept at least half of the original limit under Central Excise. He s....
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....es should be kept at Rs. 20 lakh whereas for other States, it could be Rs. 40 lakh Shri Jagdish Chander Sharma, Principal Secretary (E&T), Himachal Pradesh, stated that his State would prefer to retain the threshold limit of Rs. 20 lakh. He added that the procedure to ascertain the annual turnover of the taxpayer should be well thought of and should be part of an in-built system. He suggested to take up the exercise of determining the annual turnover threshold for registration at the beginning of every financial year i.e. in April and this could be made a part of law. 10.30. Shri Vanlal Chhuanga, Commissioner & Secretary (Taxation), Mizoram, stated that presently the States of Mizoram, Manipur, Nagaland and Meghalaya had an annual turnover threshold of Rs. 10 lakh for registration and they would find it difficult to move to the threshold of Rs. 20 lakh. He added that there were aspects other than revenue involved in taking a decision for increasing the threshold. He explained that there were great disparities amongst the districts in his State and while for a few districts, they could go for increasing the annual turnover threshold for registration to Rs. 20 lakh, in many far-fl....
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....h input tax credit, like agro based goods, or goods on which no input tax credit had been allowed for some reason were kept out of exemption threshold. He added that the global model was to have higher threshold for registration but very few exemptions. He stated that currently there was a long list of exemptions and if the annual turnover threshold for registration was to be increased, then the list of exemptions would also need to be reviewed. For example, exemption to prasad may need to be reviewed because most halwais would be below this annual turnover threshold limit ofRs. 50 lakh. He added that certain items, where the rate of tax was high and which had a very high value addition, such as pan masala, gutka, aerated beverages, air conditioners, etc., should not be given the benefit of higher threshold at the manufacturers' level as otherwise a very huge amount of value addition would go out of the tax chain. 10.33. The Hon'ble Chairperson enquired whether, as a general proposition, could all items on which cess was levied, be kept out of the proposed increase in the annual turnover threshold for registration. The Joint Secretary, TRU-ll responded that this would be....
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....,000 and the revenue foregone would be about Rs. 5,225 crore. If the annual turnover threshold for registration was raised to Rs. 50 lakh, then the maximum total number of taxpayers likely to go out of the tax net would be 21,91,000 and the maximum revenue loss would be Rs. 6,450 crore and if the annual turnover threshold was increased to Rs. 75 lakh, the total number of taxpayers going out of the tax net would be 23,81,000 and the revenue loss would be about Rs. 9,200 crore. He explained that these were conservative estimates where the revenue foregone and the taxpayers getting relief had been taken as 50% of the total numbers likely to be affected by the proposed increase in annual turnover threshold for registration. This was based as per the previous experience and also going by the fact that many businesses would be doing inter-State trade. He added that the revenue loss was not likely to be more than Rs. 5,000 to Rs. 6,000 crore if the annual turnover threshold for registration was up to Rs. 40 lakh or Rs. 50 lakh. The Hon'ble Minister from Kerala stated that discussion on revenue loss should also take into account other causes of revenue loss such as splitting the busine....
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....tisgarh stated that he did not agree with the proposal as there was no consensus in the House. He stated that the decision was being taken in a hurry whereas more thinking was needed on the subject. The Hon'ble Minister from Kerala stated that the States should be given an option to opt out of the proposed increase in annual turnover threshold for registration as the compliance burden on small taxpayers would go down substantially with the decision of the Council to increase the annual turnover threshold for Composition to Rs. 1.5 crore along with a facility for Composition taxpayers to file only an annual return. 10.39. The Hon'ble Chairperson observed that the whole concept of GST would suffer if an option was given to States to choose their annual turnover threshold for registration. He stated that perhaps an exception could be made for smaller States. The Joint Secretary, TRU-IT stated that if there were too many exceptions, it would make it very complex to calculate the annual turnover threshold at all-India level. Shri Ritvik Pandey, Joint Secretary, DoR, stated that the Constitution had made a special provision for Special Category States in Article 279A(4)(g) but....
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....ble Chairperson enquired whether the State of Goa was ready to accept the annual turnover threshold of Rs. 40 Iakh for his State. The Hon'ble Minister from Goa stated that if the Council so decided, then they would join the consensus even if it meant loss of revenue to Goa. The Hon'ble Chairperson stated that this left only the other small Union territory of Puducherry which was unwilling to increase the threshold. The Hon'ble Minister from Uttarakhand stated that his State was a Special Category State and an increase in annual turnover threshold to Rs. 40 lakh would affect 41,817 taxpayers. He stated that if the threshold was proposed to be kept at Rs. 40 lakh, then sin goods should be kept out' of this threshold. The Hon'ble Chairperson stated that it was desirable to foIIow the past practice of not giving any option to the States . 10.43. The Hon'ble Minister from Kerala supported the proposal that the States be given an option to keep the annual turnover threshold for registration at Rs. 20 lakh or Rs. 40 lakh. He stated that this would not affect inter-State taxation. The Hon'ble Minister from Goa stated that although he had been pleading for an ....
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.... the tax net of the State administration and the same would be the situation for Composition taxpayers. The Hon'ble Chairperson observed that taxpayers with annual turnover of more than Rs. 1.5 crore were equally distributed between the Centre and the States and bulk of revenue came from this segment. Taxpayers below this annual turnover were largely an additional load *on the tax administration. 10.46. The Hon'ble Minister from Assam supported the suggestion to have two annual turnover thresholds for registration. He stated that his State had originally opted for the annual turnover threshold of Rs. 10 lakh as a Special Category State, but due to public pressure, they later decided to adopt the annual turnover threshold ofRs. 20 lakh. He expressed a hope that a similar situation would prevail in future if two annual turnover thresholds for registration were allowed for non-Special Category States. The Hon'ble Chief Minister of Puducherry stated that the experience suggested that even the Special Category States now wanted to come to higher threshold of Rs. 20 lakh. Similarly, in the instant case also, situation would automatically evolve in future. The Hon'ble C....
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.... given to the States to convey their decision regarding the annual turnover threshold that they would like to adopt for registration. The Council agreed to this suggestion. 10.49. The Joint Secretary, TRU-ll stated that the Council also needed to decide the annual turnover threshold for Composition scheme for Special Category States. The Hon'ble Chairperson stated that this threshold was already Rs. 75 lakh, except for Uttarakhand and Jammu & Kashmir. The annual turnover threshold for Composition for States *other than the Special Category States was being raised from Rs. 1.0 crore to Rs. 1.5 crore. The Hon'ble Minister from Assam stated that his State would like to adopt the annual turnover threshold of Rs. 1.5 crore for the Composition scheme. The Hon'ble Chairperson observed that the Composition threshold for Special Category States need not be disturbed at this stage and suggested that only those States, which wanted to increase this turnover threshold to Rs. 1.5 crore could inform the GST Council Secretariat in writing, preferably within a week's time. The Council agreed to this suggestion as also to the other proposals, in the agenda note. The Advisor to Go....
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....s. 37,046 crore. He added that these numbers would also have mixed suppliers. The effective rate of tax collection in terms of cash to turnover would be in the range of 7-7.5%. Hence the originally proposed rate was 8%. He stated that despite a Composition scheme, some categories of service providers, like contractors and professionals, were likely to continue in the tax chain because of the input tax credit involved. However, small local service providers, like beauticians, plumbers, etc. were likely to move out of the tax chain. He stated that at 5% tax rate, the revenue loss would be about Rs. 4,500 crore. He added that the GoM took into account these considerations and then suggested the rate of tax as 5%. The Hon'ble Chairperson wondered as to how many pure service providers would be covered under this scheme. The Joint Secretary, TRU-ll stated that with the available data, it would appear that the traders constituted much larger percentage and service providers and manufacturers constituted about 25% only. However, he added that it would be difficult to identify the pure service providers. Therefore, the numbers were arrived at by taking out the numbers of traders and man....
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.... and therefore, one need not stick to Revenue Neutral Rate (RNR). He also pointed out that the rate of Composition tax for restaurants was also 5%. 10.54. The Hon'ble Deputy Chief Minister of Delhi stated that the rate of Composition tax for goods suppliers was 1% and a Composition tax rate of 8% for services suppliers would make the difference between the two very huge. He further stated that it was important to incentivize taxpayers in the services sector to adopt the Composition scheme. The Hon'ble Minister from Kerala stated that the Composition scheme for services was being adopted for the first time. He added that there was no such scheme even under the Service Tax regime and therefore a higher rate could be adopted so that there was no loss in revenue. The Hon'ble Chairperson stated that the experience in GST was that response from Service Tax was much below expectation, and therefore, there was a need to get them into the habit of paying the tax. The Hon'ble Minister from Chhattisgarh stated that the Composition limit could be set at an annual turnover of Rs. 40 lakh and the rate of tax could then be kept at 5%. 10.55. The Joint Secretary, TRU-ll state....
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....ded to look at other changes taking place in tl1e economy today, such as service providers suffering lower taxes due to reduction in tax rates on tl1eir input goods. He added that all these concessions (of fixing 5% rate of tax) would create havoc to revenue and suggested to keep the rate of tax at 8%, He added that the input tax credit would never be 10% and where the available input tax credit was less, the taxpayer would never opt for Composition scheme. He added that retail services (B2C), like hair dressers, cable operators, dry cleaners, etc. in which there was a high margin, a lower rate of tax would have implication on revenue. The Hon'ble Minister from Karnataka stated that a very reasoned argument had been presented by the State of Punjab to keep the tax rate at 8% and it should be respected. Shri G.D. Lohani, Joint Secretary, TRU-I stated that while fixing the tax rate for composition, one should also keep in mind that the composition taxpayer would be paying the tax on his full turnover including the exempted supplies, and also the threshold exemption i.e. Rs. 20 lakh, was available to him. 10.59. The Principal Secretary (E&T), Himachal Pradesh, stated that his S....
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....India), they have identified seven companies out of 43 companies, which had submitted the Expression of Interest to provide software for tax compliance purposes under GST. This software would enable a taxpayer to generate invoices, take stock of purchases, auto-prepare FORMS GSTR-1, GSTR-3B, GSTR-4, GSTR- 9, etc. and also prepare balance sheet, profit and loss account, etc. He stated that all the selected companies have agreed to provide basic version of software covering above mentioned functionalities free of cost to taxpayers having annual turnover upto Rs. 1.5 crore. He flll1her stated that the software was proposed to be introduced in a staggered manner from JS1 February, 2019, starting with two States and adding more in a phased manner with an aim to cover all States in two to three months. The Secretary stated that through a rigorous process, GSTN had worked to provide accounting and billing software to small taxpayers free of cost by enlisting service providers. This would be available to those having an annual turnover of up to Rs. 1.5 crore. 10.63. The Hon'ble Minister from Kerala stated that there should also be a scheme to provide free computers to small taxpayer....
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....resholds for registration to suppliers of goods only on the consideration that it would not affect the inter-State trade; 11.9. The States to convey their decision regarding the applicable annual turnover threshold for registration preferably within a week's time; 11.10. For the Special Category States, to retain the existing annual turnover of Rs. 7 5 lakh for Composition scheme for goods but those Special Category States desirous of increasing their turnover threshold for Composition scheme to Rs. 1.5 crore, to inform the GST Council Secretariat in writing, preferably within a week's time; 11.11. GST Council Secretariat to place before the Council the cumulative figure of loss of revenue due to decisions of the Council from November, 2018 till date; (iv) Composition scheme for small service providers 11.12. To have a residual category of Composition scheme under the GST Law for service suppliers (including those making a mixed supply of goods and services) i.e. for those who are not eligible for present composition scheme, and for this Composition scheme, the annual turnover threshold in the preceding financial year shall be Rs. 50 lakh and the rate of tax ....
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....proposal, Joint Secretary, TRU-II further stated that: a. the proposal was prepared keeping in mind the buyers' perception that GST rate was high and the benefit of ITC was also not being passed on by the builders; b. the sector was not in good health and that it was suffering from cash flow problems on account of credit overhang which was aggravated by tax payment to be done on intermediate services such as Transfer of Development rights; c. the actual tax payment data of the sector was analyzed and it was found that the total cash payment from the sector was less than 5%; d. during the discussions in the Fitment Committee, it was brought out that the impact of proposed tax on lower end flats might lead to price rise; hence, GST @ 3% was proposed on the Affordable Housing category, which were proposed to be defined per the Reserve Bank of India priority sector lending norms. Houses up to Rs. 45 Iakh (with population of 10 lakh and above) in the big cities and up to Rs. 30 lakh in the smaller cities would be covered under the Affordable Housing category; e. due to levying of flat tax rate without input tax credit as proposed, the bac....
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....eing residential. The Secretary explained that the commercial property would be taxed at the tax rate applicable to the commercial property and the Fitment Committee would appropriately define the residential and commercial property. Joint Secretary, TRU-ll added that there were various methods to identify the nature of property such as declaration of type of property in the registration documents, definition of residential property in the local municipal laws, definition under the allied acts such as Income Tax Act etc. which would also be explored by the Fitment Committee before arriving at a proper definition under the GST Act. The Hon'ble Deputy Chief Minister of Gujarat further enquired whether the tax would be applicable on the selling price. The Secretary explained that in case of a big building with some floors commercial and some floors residential, the commercial floors would attract the tax rate applicable to commercial flats whereas the tax rate of 5% or 3% as the case may be, would be attracted on remaining residential floors with no proportionate lTC. The Joint Secretary TRU-ll clarified during discussions later that tax would be charged on the full sale price. ....
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....18% on majority of other input items and 12% on some other materials and the combined lTC available to him for payment of h'is output tax came to 8-9%. Eventual tax burden on him would be 12% minus the lTC available to him. However, the unscrupulous builders were not passing the benefit of input tax credit to the potential buyers by reducing the base rates but were recovering the entire 12% in cash from the buyers. 12.7. The Hon'ble Chairperson added that a question arose as to how to resolve the issue and to come out of the logjam. The proposed solution was to fix the GST rate at 5% for normal/luxury flats and at 3% for the affordable category flats, and at the same time, to impose the condition of buying 80% of Inputs and Input Services from the registered dealers to prevent the input items going out of GST chain. Thus, the entire situation in the real estate sector where the unscrupulous builders were not passing the input tax credit benefit to the buyers would be eliminated. 12.8. The Hon'ble Minister from Chhattisgarh stated that there was no doubt that the real estate sector was stressed and it had been assured in the current proposal that there was no reven....
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.... normal or luxury category and both were covered by ITC benefit, which was to the tune of roughly 8% as per his interaction with the builders. An honest builder would show on the invoice that he was reducing the base price by 8% and thereafter imposing tax of 8% or 12% as the case may be. The problem was that the builders were not operating fairly and the buyers were scared away from the sector instead of actually appreciating the benefits of GST. Thus, the unfair trade practice was to make a profit of 8% by not giving the benefit of ITC to the customers and charging full tax from them. 12.11. The Hon'ble Minister from Punjab stated that the foundation of GST was to reward the honest taxpayers who remained in the credit chain and punish the unscrupulous traders who operated by purchasing the goods and services without bills. The current proposal before the Council seemed to be alien to the spirit of GST. He further stated that as the Hon'ble Minister from Kerala pointed out, GST was a self-policing tax where if any tax was missed at one stage, it would be recovered at the next stage. However, the Council departed from this principle in the past in the case of Restaurants....
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....proposal, instead of effectively reining in the builders, might increase the incidence of tax on the consumer which could be counter-productive. 12.14. The Hon'ble Minister from Karnataka submitted that studies available in the public domain showed that the incidence of tax on the high-end houses would come down while on the affordable category, it would go up. DG, Anti-profiteering submitted that there were about 30 complaints under investigation with the DG, Anti-profiteering in case of builders and they were going through the input, output and the other records of the builders to establish whether or not the benefit of ITC had been passed on. The Hon'ble Chairperson observed that addressing the problem by way of Anti-profiteering mechanism or through RERA mechanism would be better. Otherwise, with" the remedy that had been proposed, a situation could arise where consumer would be worse off than living with the problem itself. 12.15. The Hon'ble Deputy Chief Minister of Delhi stated that it was better to refer the issue to a Group of Ministers as suggested by the Hon'ble Minister from Punjab. The Hon'ble Deputy Chief Minister of Bihar stated that a day b....
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....tion of 16% between two rates helped the larger States to exploit customers as smaller States could not compete with them. High differential rates encouraged non-compliance by small business. iv. Hon'ble Calcutta High Court in a judgement dated 10.10.2018 in the case of M/s Teesta Distributor vs Uol had upheld the prevailing rate structure. Even then, the product being a sin I de-merit good, needed to be taxed at rates higher than 12%. The high differential in tax rate also led to malpractice of attempting to avail tax rate of 12% by mis-representation. 14.1. The Hon'ble Minister from Karnataka stated that from the proposal it was not clear as to from where it had originated. He further stated that as had been pointed out by the Hon'ble Minister from Andhra Pradesh, a number of proposals were sent by the States to the GST Council/Fitment Committee which were not finding mention in the final agenda circulated before the meeting. He, therefore, stated that there was a need to evolve a process of dealing with such representations, else States might lose interest and feel that on the one hand, they had lost autonomy in GST while on the other, they were also not ....
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....structure which was leading to evasion of taxes. Taxation of this model needed to be addressed and it should be taxed @ 28% GST. 14.4. The Hon'ble Minister from Kerala stated that majority of States had banned the lottery, and, therefore, they did not have any direct stake or interest in the instant agenda. However, States, particularly North Eastern States and 5 other major States, viz. Maharashtra, Punjab, West Bengal, Kerala and Goa who were running lotteries had a stake on the issue. One would agree that lottery was not a desirable activity as it had an element of gambling, but it could be allowed only for the purposes of revenue generation. Government of India had promulgated a Central Lottery Act to ensure one did not undertake measures which would make lottery addictive, such as the number of draws that lottery could have, the number of digits in the lottery, price system, etc. Secondly, objective of Central Law was that the benefits would go directly into public service and for that purpose, it was provided in the law that Government had to print the lottery tickets. Further, all revenues from lottery would go directly to the State treasury and all-inclusive expendit....
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.... lacked proper infrastructure to run it by State machinery and that is why they ran it through somebody else as authorised outsourced agency. The Hon'ble Minister from Kerala stated that private players who had to pay ta,-x at the rate of 28% were not finding it attractive enough to compete with Kerala model. Therefore, such players were campaigning to remove this differential rate and adopt uniform rates for lottery across the country for their personal gains and accessing market in other States. This issue did not concern the majority of States but it was a serious concern for States where lottery operated. One should not upset the present system, allow it to continue and asked as to what was the rationale for changing the present structure. He stated that Kerala would help create a structure for smaller States or pay the amount that was paid by these private players to those States acting as their agent in lottery distribution but they should avoid giving lottery to these middlemen and upset the order in the society. 14.8. The Hon'ble Minister from Assam stated that before introduction of GST, Kerala had demanded 28% GST on lottery universally from GST Council but now....
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.... contested by lottery group/associations till the Hon'ble Supreme Court, but present rate structure of 12% .- and 28% had been upheld even by the apex court and it was clear that State run lottery attracts 12% GST whereas State authorised privately run lottery would attract 28% GST. 14.12. The Hon'ble Minister from Assam stated that the argument of differential tax rates was not proper, and it was like punishing North Eastern States for inability to do certain things. On one commodity two rates should not exist and it was not warranted. 14.13. Shri Manoj Rai, Additional Commissioner, State Tax, Sikkim stated that a lot of misreporting was happening regarding "inter-State operations of lottery and that it was more in case of online lotteries. Further, carrying lottery tickets to neighbouring States was not a big task as tickets could be transported easily. He supported the proposal of uniform GST structure to avoid misreporting. Shri Anirudh S. Singh, Commissioner, State Tax, Arunachal Pradesh also stated that misrepresentation and misreporting was rampant, especially in online lottery and was leading to revenue leakage. 14.14. The Hon'ble Chief Minister of Pudu....
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....GST and needed suggestions on these real issues. He added that discussion should be in the spirit of having a truly functional GST. 14.17. The Hon'ble Deputy Chief Minister of Delhi suggested that if the Council agreed, the issue could be discussed later, and it may be referred to a GoM for detailed examination. Commissioner, State Tax, West Bengal suggested that all the States who run lottery might be members of this GoM as other States were actually not affected. 14.18. The Hon'ble Chairperson observed that in a large group like Council, one might not be able to discuss all aspects of the issue. He added that during the discussion, several issues were discussed such as what was the significance of different tax rates on lottery, why one needed a uniform rate on different types of lottery systems, and what the challenges were. It was also felt that the matter pertained to only few States including many North East States. Hence, the issue required a wider consultation with all lottery States. Therefore, he suggested that a GoM could be constituted on this subject in which States like Kerala, North Eastern States might be given representation and one representative be ....
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....Item 6: Issues recommended by the Law Committee for the consideration of the GST Council Agenda Item 6(i): Notification of provisions of the CGST (Amendment) Act, 2018; UTGST (Amendment) Act, 2018 and the GST (Compensation to States) Amendment Act, 2018 and the IGST (Amendment) Act, 2018 18. The Secretary invited the Principal Commissioner (GST Policy Wing), CBIC, to make a presentation on this Agenda item. The Principal Commissioner (GST Policy Wing), CBIC, made a presentation (attached as Annexure 3 to the Minutes). He explained that the Council, in its 31^st Meeting held on 22^nd December, 2018 had recommended that the Amendment Acts of the CGST Act, the UTGST Act, the GST (Compensation to States) Act and the IGST Act, were to be brought into force with effect from JS' February, 2019. The Law Committee examined the provisions of all the GST (Amendment) Acts, 2018 in conjunction with the CGST Act, 2017, the SGST Acts, 2017, etc. and proposed to bring into force all the provisions of the four GST (Amendment) Acts with effect from 1^st February, 2019 except the provisions contained in Sections 8(b), 17, 18 and 20(a) of the CGST (Amendment) Act, 2018 for the time being. Th....
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.... the Principal Commissioner (GST Policy Wing), CBIC, stated that certain notifications would need to be issued pertaining to the Notifications on the Amendment Acts of the CGST Act, the UTGST Act, the GST (Compensation to States) Act and the IGST Act. The details of the amendments to be carried out were contained m U Annexure A to Agenda notes for Agenda Item 6(ii). The Council agreed to the proposal. 21. For Agenda item 6(ii), the Council approved to carry out amendments to the Notifications as contained in Annexure A to Agenda Item 6(ii) and to also amend the corresponding Notifications issued by the States (except Notification No.02/2017-Central Tax dated 19^th June, 2017). Notifications carrying out these amendments shall be issued after due vetting by the Union Ministry of Law. Agenda Item 6(iii): Consequential amendments in Circulars and Orders issued earlier in light of bringing into force the provisions of the CGST (Amendment) Act, 2018; the UTGST (Amendment) Act, 2018; the GST (Compensation to States) (Amendment) Act, 2018 and the IGST (Amendment) Act, 2018 22. Introducing this Agenda item, the Principal Commissioner (GST Policy Wing), CBIC, stated that certain co....
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.... Orders as well as Removal of Difficulty Order. Agenda Item 6(iv): Proposal for amendment in CGST Rules, 2017 24. The Principal Commissioner (GST Policy Wing), CBIC, stated that the Law Committee in its meeting held on 3^rd and 4^th January, 2019 had recommended minor amendments in the CGST Rules, 2017 to ease the process of refunds and to extend the date of examination for GST Practitioners. He explained the proposed changes in the Rules and suggested that the Council could approve the proposed changes, as contained in the notes of Agenda Item 6(iv). The Council agreed to the same. It also agreed that pari materia changes would be carried out in the SGST Rules. 25. For Agenda item 6(iv), the Council approved the proposals as contained in the Table below the notes of Agenda item 6(iv). The Council also approved that suitable notifications shall be issued after due vetting by the Union Ministry of Law and that pari materia changes shall be carried out in the SGST Rules. Agenda Item 7: Review of Revenue Position 26. Secretary, stated that the revenue position had been discussed by the Council in its 31^st meeting about three weeks back and since then not much had chang....
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....the Principal Commissioner (GST Policy Wing), CBIC (attached as Annexure 3 to the Minutes). He stated that the ITGRC shall consider on merits, the specific ' cases as covered under the orders of the Hon'ble High Court of Madras and by any other Hon'ble High Court as sent by any State or Central authority, to the GST Council Secretariat by 31^st January, 2019. The ITGRC shall consider the listed cases (as informed by States/ Centre before 31^st January, 2019) where the following conditions are satisfied: - i. TRAN-1, including revision thereof, has been filed on or before 27th December, 2017 and there is an error apparent on the face of the record (such cases of error apparent on the face of the record will not cover instances where there is a mistake like wrong entry of an amount e.g. Rs. 10,000/- entered for Rs. 1,00,000/-); and ii. The case should be recommended to the ITGRC through GSTN by the concerned jurisdictional Commissioner or an officer authorised by him in this behalf (in case of credit of Central taxes/duties, by the Central authorities and in the case of credit of State taxes, by the State authorities, notwithstanding the fact that the ta....
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.... avoid return to the permanent static check posts system. 30.1. The Hon'ble Minister from Tamil Nadu in his written speech relating to the agenda stated that his State was opposed to the recommendations contained in agenda of adopting Option-II (i.e. Stage-II) for stoppage and checking of vehicles in real time near the toll plaza where RFID reader was located. It was further stated that it would pave the way for creation of check post in a new nomenclature with all attendant problems negating the benefits of GST. Further, the RFID technology should be implemented after due consultation with all stakeholders, adequate training and awareness to the Industries, failure free testing and piloting the same with stakeholder. 30.2. Secretary stated that it was felt that the issue required a wider consultation with some other stakeholders who were not part of the exercise so far. Accordingly, it was recommended to fom1 a Committee of Officers from Centre, States and GSTN to deliberate and suggest on following Terms of Reference (ToR): i. Building an inter-operable robust system and examine the feasibility and advantages of existing system versus use of FASTag Data; ....
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....or the quarter 1^st October 2018 to 31^st October 2018. Agenda Item 11: Report of the GoM on Revenue Mobilisation 34. Introducing the Agenda, the Joint Secretary (DoR) stated that the Group of Ministers (GoM) held two meetings to discuss the following Terms of Reference: i. Whether the mechanism of funding to the States through National Disaster Response Fund (NDRF) is sufficient in case of natural calamities and disaster; ii. Whether there should also be a supplementary mechanism for funding natural calamities and disasters through GST, and if so, whether it should be through additional cess or tax, and whether such levy should be State specific or across the country; iii The circumstances in which a State shall become entitled to get funding over and above the funds obtained through NDRF mechanism; iv. Whether it is permissible under the relevant provisions of Constitution and the GST law to create an omnibus GST Disaster Relief Fund for natural calamities or whether resources can be raised only for a specific event qualifying as natural calamity or disaster; v. If a GST Disaster Relief Fund is created, what should be the mechani....
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....e reconstruction expenditure outside the FRBM limits or by providing additional borrowings over and above the FRBM target over a specified number of years. 34.3. The Hon'ble Chairperson asked the Minister from Kerala as to whether the above recommendations were acceptable to him to which he agreed. The Hon'ble Ministers from Assam and Goa also supported the recommendations of the GoM. The Hon'ble Deputy Chief Minister of Delhi stated that the recommendation (i) and (iii) had nothing to do with the GST while recommendation (ii) pertained to GST which was acceptable. The Hon'ble Minister from Kerala stated that though this may not be part of GST Council's mandate but it needed to be understood that for rebuilding after a natural disaster funds were required which the Government of India allows through borrowing from external agencies. He added that the Government of India should permit external borrowing as a means of additional resource mobilisation. The Hon'ble Chairperson stated that this suggestion was out of direct scope of the GST Council, but the recommendations of the GoM would be taken up with the Government of India separately. He further suggeste....
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....attisgarh 7 Delhi 8 Goa 9 Gujarat 10 Haryana 11 Jharkhand 12 Karnataka 13 Kerala 14 Madhya Pradesh 15 Maharashtra 16 Nagaland 17 Puducherry 18 Punjab 19 Rajasthan Shri Yanamala Ramakrishnudu Dr Himanta Biswa Sarma Shri Sushil Kumar Modi Shri T.S. Singh Deo Shri Manish Sisodia Shri Mauvin Godinho Shri Nitinbhai Patel Capt. Abhimanyu Shri C.P. Singh Shri Krishna Byre Gowda Dr. Thomas T M Isaac Shri Priyavrat Singh Shri Sudhir Mungantiwar Shri Metsubo Jamir Shri V. Narayanasamy Shri Manpreet Singh Badal Charge Union Finance Minister Minister of State (Finance) Minister of Finance, Planning, CT and Legislative Affairs Finance Minister Deputy Chief Minister Minister for Commercial Taxes Deputy Chief Minister Minister for Panchayat Deputy Chief Minister Excise & Taxation Minister Minister - Department of Urban Development, Housing and Transport Minister for Rural Development, Law and Parliamentary Affairs Finance Minister Minister (Energy) Finance Minister Minister, Urban Development and Municipal Affairs Chief Minister Fi....
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....neet Khurana Shri Susanta Mishra Shri Harsh Singh Shri Shashikant Mehta Shri Siddharth Jain Shri Vikash Kumar Ms. Meghaa Gupta Shri Achin Garg Shri Paras Sankhla Shri Nikhil Varma Shri Mahesh Tiwari Shri Debashis Chakraborty Shri Anurag Sehgal Shri Vikash Shukla Shri Nagendra Goel Page 45 of 92 Charge Revenue Secretary Chief Economic Adviser Chairman, CBIC Member (Budget), CBIC Member (GST), CBIC Special Secretary, GST Council Pr. CCA CCA Adviser (GST), CBIC Pr. DG, DG-Audit, CBIC Pr. DG, DG Systems, CBIC Joint Secretary, TRU-I, DoR Joint Secretary, TRU-II, DOR Joint Secretary, DoR Pr. Commissioner (GST), CBIC Pr. ADG, GST, CBIC ADG, GST, CBIC DG (M&C) ADG (M&C) OSD, TRU-II, DOR Deputy Secretary, TRU-II, DOR Deputy Secretary, DoR Joint Comm., GST Policy Wing Joint Comm., GST Policy Wing Technical Officer, TRU-II, DOR Technical Officer, TRU-II, DOR OSD, TRU-II, DOR Dy. Comm., GST Policy Wing Dy. Comm., GST Policy Wing Asst. Comm., GST Policy Wing Asst. Comm., GST Policy Wing OSD to Union Minister OSD to MoS (Finance) PS to MoS OS....
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....ioner, Chandigarh Zone, CBIC Pr. Commissioner, Delhi Zone, CBIC Pr. Commissioner, Meerut Zone, CBIC Commissioner, Bhopal Zone, CBIC Chief Commissioner, Bengaluru Zone, CBIC Commissioner, Lucknow Zone, CBIC Commissioner, Chennai Zone, CBIC Commissioner, Panchkula Zone, CBIC Pr. Commissioner, Vadodara Zone, CBIC Commissioner, Jaipur Zone, CBIC Commissioner, Pune Zone, CBIC Pr. Commissioner, Hyderabad Zone, CBIC MINUTE BOOK Estd. 1949 80 Govt. of India JAYNA 81 Govt. of India 73 Shri Sadhu Narasimha Reddy Shri Nitin Anand Dr D.Sambasiva Rao Andhra 82 Pradesh Andhra 83 Shri T Ramesh Babu Pradesh Arunachal 84 Shri Satya Gopal Pradesh Arunachal 85 Shri Anirudh S Singh Pradesh 86 Assam 87 Bihar 88 Bihar 89 Bihar 90 Chhattisgarh 91 Chhattisgarh 92 Chhattisgarh 93 Delhi 94 Delhi 95 Delhi 96 Goa Himachal Pradesh Shri Anurag Goel Dr Pratima Shri Arun Kumar Mishra Shri Ajitabh Mishra Smt Sangeetha P Shri S. L. Agarwal Manish Mishra Ms. Renu Sharma Shri H. Rajesh Prasad Shri Rajesh Goel Shri Dipak Bandekar Sh....
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.... Shri V. K. Garg 129 Punjab 130 Punjab 131 Rajasthan 132 Rajasthan 133 Rajasthan 134 Sikkim 135 Tamil Nadu 136 Tamil Nadu 137 Telangana 138 Telangana 139 Telangana 140 Tripura 141 Tripura 142 Uttar Pradesh 143 Uttar Pradesh 144 Uttar Pradesh 145 Uttarakhand 146 Uttarakhand 147 Uttarakhand 148 West Bengal 149 West Bengal Shri Vivek Pratap Singh Shri Pawan Garg Dr. Prithvi Raj Dr. Preetam B Yaswant Shri Ketan Sharma Shri Manoj Rai Dr. T.V Somanathan Shri C Palani Shri Somesh Kumar Shri Anil Kumar Shri Laxminarayan Jannu Shri Sudip Bhowmik Shri Badal Baidya Shri Alok Sinha Shri C. P. Mishra Shri Sanjay Pathak Ms. Sowjanya Shri Piyush Kumar Shri Roshan Lal Ms. Smaraki Mahapatra Shri Khalid A Anwar Commissioner, State Tax PS to Minister Asst. Commissioner, CT Jt. Commissioner, CT Asst. Commissioner, CT Commissioner & Secretary (Taxation) Jt. Commissioner, State Tax Pr. Resident Commissioner Commissioner, CT Commissioner, CT Addl. Commissioner, CT Commissioner (ST) Addl. Chief Secretary-cum-Financial Commissioner (Taxatio....
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.... 50 of 92 3 JAYNA BOOK DEPOT Extd. 1949 JB JAYNA MINUTE BOOK NATION TAX MARKET Agenda No. 6 (i) (1/1) Notification of provisions of the GST Amendment Acts Amendment to UTGST Act, IGST Act, GST (Compensation to States Act) to be notified w.e.f. 01.02.2019 • Amendment to CGST Act to be notified w.e.f. 01.02.2019, except: ✓provisions contained in section 8(b), 17, 18 & 20(a) - to be notified at a later date. provisions contained in section 28(b)(i) and 28(c)(i) · not to be notified Corresponding amendment to SGST Acts of the respective States would be notified accordingly w.e.f. 01.02.2019 INATION TAX MARKET Agenda No. 6 (ii) (1/4) Consequential amendments in notifications issued earlier in light of bringing into force the provisions of the GST Amendment Acts Amendment also to be done by States ⚫ 8 notifications require amendments, out of which S. No. 1 Notification No. 02/2017- CT dated 19.06.2017 not required to be carried out by States S. No. 3- Notification No. 57/2017-CT dated 15.11.2017 to be amended after new return system is implemented S. No. 5, 6....
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....implemented S. No. 9 Amendment to Circular issued under Integrated Tax not required to be carried out by States • Amended Circulars to be issued on 01.02.2019. Similar circulars to be issued by States Page 53 of 92 9 NATION TAX MARKET 10 CHAIRMAN'S INITIALS CHAIRMAN'S INITIALS MINUTE BOOK INATION TAX MARKET Agenda No. 6 (iii) (2/6). Details of Consequential amendments in Circulars Sl. No. 1 Circular No. Amendments To be revisited/ rescinded after the new return 7/7/2017 dated 01.09.2017 system is brought into force as FORM GSTR- 2 has been kept in abeyance 2 8/8/2017 dated 04.10.2017 3 15/15/2017 dated 06.11.2017 Para 2(k) to be amended in order to allow acceptance of LUT for supply of services to any country for which payment is received as per RBI guidelines (by inserting the words 'or in Indian rupees wherever permitted by the Reserve Bank of India') To be revisited rescinded after the new return system is brought into force 11 INATION TAX MARKET Agenda No. 6 (iii) (3/6) Details of Consequential amendments in Circulars Sl. No. 4 ....
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....f the CGST Act, 2017 making changes to the Composition scheme, difficulties regarding which were removed by the said removal of difficulty order. Page 55 of 92 CHAIRMAN'S 14 INITIALS MINUTE BOOK INATION TAX MARKET Agenda No. 6 (iii) (6/6) Consequential amendments in Circulars and Orders issued earlier in light of bringing into force the provisions of the GST Amendment Acts * Removal of difficulty Order No. 01/2017-Central Tax dated 13.10.2017 to be rescinded, and fresh Removal of difficulty Order to be issued for extension of the beneficial condition detailed below for all composition taxpayers: that for computing the aggregate turnover in order to determine eligibility for composition scheme, value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount shall not be taken into account. 15 INATION TAX MARKET CHAIRMAN'S INITIALS Agenda No. 6 (iv) (1/1) Amendment in CGST Rules, 2017 âš« Second provisio to Rule 83(3): period of clearing the examination by GSTP may be extended to 31.12.....
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....rief: 1. Increase of limit of turnover for composition scheme to Rs. 1.5 crore w.e.f. 01.04.2019; II. Simplification under composition scheme by way of quarterly payment with annual return; III. Increasing threshold exemption for suppliers of goods; IV. Composition scheme for small service providers; V. Provision of free Accounting and Billing Software to small taxpayers by GSTN. Page 58 of 92 JAYNA BOOK DEPOT MINUTE BOOK Estd. 1949 JB JAYNA I. Increase of limit of turnover for composition scheme to Rs. 1.5 crore w.e.f. 01.04.2019 Background: GST Council in its 23rd meeting held on 10th November, 2017, had decided that eligibility for composition shall be increased to Rs.1.5 crore per annum. Amended CGST Act, 2017 shall become effective from 1st Feb, 2019. The decision to raise eligibility for the composition scheme for goods may be given effect from 1st of April, 2019. The decision would be a relief to the manufacturers who were exempt from payment of Central Excise duty upto Rs 1.5 Cr. The revenue implication of this decision for all taxes put together is likely to be much less than Rs 1000 cr per year ....
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....ial Category States after discussion with them. Page 61 of 92 ру CHAIRMAN'S INITIALS CHAIRMAN'S INITIALS MINUTE BOOK Threshold limit increased Revenue No of existing Revenue No of regular foregone from for dealer compositi composition taxpayers getting foregone from regular relief taxpayers of goods to on (Rs cr) taxpayers getting relief (excluding nil filers) Total revenue Total Number (Rs Cr) taxpayers (Rs cr) (taken as 50% [taken as 50% of revenue] of number in the slab] (1) (2) (3) (4) (5) (6) (7) 20 lakh 870 10,93,000 1,600 5,33,000 2,470 16,26,000 40 lakh 1,725 13,35,000 3,500 7,29,000 5,225 20,64,000 50 lakh 2,050 13,95,000 4,400 7,96,000 6,450 21,91,000 75 lakh 2,600 14,63.000 6.600 9,18,000 9,200 23,81,000 Merits advanced in favour of the proposal: Economic cost and Multiplier effect: The revenue earned from small taxpayers is not commensurate with compliance cost in GST(For a turnover of Rs.60 lakhs the average tax payment ....
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....n the revenue losses at various thresholds, at present threshold should be raised to Rs 40 to 50 lakh. CHAIRMAN'S INITIALS Page 63 of 92 CHAIRMAN'S INITIALS MINUTE BOOK III. Discussion in GoM for MSME â–¶3 An alternative view was expressed in light of the background of the proposal, that most of the MSMEs having turnover below Rs 1.5 crore under the Central Excise regime were exempt from taking registration and they needed to be facilitated. It was also noted that high compliance burden on the small tax payers yielded negative economic returns. The revenue earned from small taxpayers is not commensurate with compliance cost in GST (for a turnover of Rs. 60 lakh the average tax payment per month is about Rs.5000/- while the compliance cost would be significantly higher). The money freed by lowering the compliance burden would add to the economy by way of multiplier effect. > Accordingly, a view was expressed that the annual turnover threshold should be raised to Rs 75 lakh as the benefits of raising the limits are considerable for the economy. 13 III. Recommendation of GoM for MSME Following recommendations wer....
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.... payable cash turnover (%) (%) (1) (2) (3) (4) (5) (6) (7) 20 lakh 25,88,534 2,04,797 33,861 15,433 16.5 7.5 30 lakh 29,13,872 3,18,696 49,998 23,107 15.7 7.3 40 lakh 31,47,078 4,35,136 66,153 30,352 15.2 7.0 50 lakh 33,23,766 5,56,840 81,949 37,046 14.7 6.7 AT 5% COMPOSITION TAX RATE FOR SERVICES, REVENUE LOSS WOULD BE AROUND RS 5000 CR. 17 IV. Discussion in GoM for MSME - The GoM noted that the tax rate of 8% was high as in restaurant a rate of 5% has been prescribed. ➤ As far as revenue loss due to a rate of 5% is concerned, many service providers are likely to remain in the input tax credit chain. -Therefore, the revenue loss would be less than Rs 5000 crore annually, if 50% of taxpayers stay in the input tax credit chain. ▸ Composition scheme for services needs amendment in law and till such time it may be made operational through a rate notification. > Also, to address the issue of mixed suppliers of goods and services, composition scheme for services should be available as a residual scheme. Page 66 of 92 JAYNA BOOK D....