Detailed Agenda Note - 32nd GST Council Meeting - Volume 1

Confidential





Agenda for
32nd GST Council Meeting

10 January 2019

Volume – 1


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File No: 01/32nd GSTCM/GSTC/2019
GST Council Secretariat

Room No.275, North Block, New Delhi
Dated: 01 January 2019

Notice for the 32nd Meeting of the GST Council scheduled on 10 January 2019
The undersigned is directed to refer to the subject cited above and to say that the 32nd meeting
of the GST Council will be held on 10th January 2019 (Thursday) at Main Committee Hall,
Parliament House Annexe, New Delhi*. The schedule of the meeting is as follows:
• Thursday, 10th January 2019: 10:30 AM to 01:30 PM
2. In addition, an Officer’s Meeting will be held on 09th January 2019 at the same venue as
per following schedule:
• Wednesday, 09th January 2019: 10:30 AM to 04:30 PM
3. The Agenda Items for the 32nd Meeting of the GST Council will be communicated in due
course of time.
4. Please convey the invitation to the Hon’ble Members of the GST Council to attend the
meeting.

-Sd-
(Dr. Ajay Bhushan Pandey)
Secretary to the Govt. of India and ex-officio Secretary to the GST Council
Tel: 011 23092653
Copy to:
1. PS to the Hon’ble Minister of Finance, Government of India, North Block, New Delhi with
the request to brief Hon’ble Minister about the above said meeting.
2. PS to Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi with
the request to brief Hon’ble Minister about the above said meeting.
3. The Chief Secretaries of all the State Governments, Delhi and Puducherry with the request to
intimate the Minister in charge of Finance/Taxation or any other Minister nominated by the State
Government as a Member of the GST Council about the above said meeting.
4. Chairperson, CBIC, North Block, New Delhi, as a permanent invitee to the proceedings of the
Council.
5. Chairman, GST Network
* Note - The Venue of the Meeting was changed to Hall No 2-3, Vigyan Bhawan, New Delhi
on both days, as communicated by email on 03.01.2019.

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Agenda Items for the 32nd Meeting of the GST Council on 10th January 2019
1. Confirmation of the Minutes of 31st GST Council Meeting held on 22nd December, 2018
2. Deemed ratification by the GST Council of Notifications, Circulars and Orders issued
by the Central Government
3. Decisions of the GST Implementation Committee (GIC) 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 and 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 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
iv. Proposal for amendment in CGST Rules, 2017
7. Review of Revenue position
8. Allowing ITGRC (IT Grievance Redressal Committee) to consider non-technical issues
(errors apparent on the face of record)
9. Use of RFID (Radio-frequency Identification) data for strengthening enforcement of e-
Way bill system under GST
10. Quarterly Report of the NAA (National Anti-profiteering Authority) for the quarter
October to December 2018 for the information of the GST Council
11. Report of GoM on Revenue Mobilisation
12. Any other agenda item with the permission of the Chairperson
13. Date of the next meeting of the GST Council

* * * * * * * *

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TABLE OF CONTENTS
Agenda
No.
Agenda Item Page
No.
1
Confirmation of the Minutes of 31st GST Council Meeting held on 22nd
December, 2018
6
2
Deemed ratification by the GST Council of Notifications, Circulars and Orders
issued by the Central Government
88
3
Decisions of the GST Implementation Committee (GIC) for information of the
Council
89
4
Interim Report of GoM (Group of Minister) on MSMEs (agenda note to be
circulated separately)
-
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)
90
97
98
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 and 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 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
iv. Proposal for amendment in CGST Rules, 2017

100

101



105



112
7 Review of Revenue position 115
8
Allowing ITGRC (IT Grievance Redressal Committee) to consider non-
technical issues (errors apparent on the face of record)
123
9
Use of RFID (Radio-frequency Identification) data for strengthening
enforcement of e-Way bill system under GST
125
10
Quarterly Report of the NAA (National Anti-profiteering Authority) for the
quarter October to December 2018 for the information of the GST Council
134
11
Report of GoM on Revenue Mobilisation (agenda note to be circulated
separately)
-
12 Any other agenda item with the permission of the Chairperson -
13 Date of the next meeting of the GST Council -

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Discussion on Agenda Items
Agenda Item 1: Confirmation of the Minutes of the 31st GST Council Meeting held on 22nd
December 2018
The thirty first Meeting of the GST Council (hereinafter referred to as ‘the Council’) was
held on 22nd December 2018 at Vigyan Bhawan, New Delhi under the Chairpersonship of the
Hon’ble Union Finance Minister, Shri Arun Jaitley (hereinafter referred to as the Chairperson).
A list of the Hon’ble Members of the Council who attended the meeting is at Annexure 1. A list
of officers of the Centre, the States, the GST Council Secretariat and the Goods and Services Tax
Network (GSTN) who attended the meeting is at Annexure 2.
2. The following agenda items were listed for discussion in the 31st Meeting of the Council:
1. Confirmation of the Minutes of 30th GST Council Meeting held on 28 September, 2018
2. Deemed ratification by the GST Council of Notifications, Circulars and Orders issued
by the Central Government
3. Decisions of the GST Implementation Committee (GIC) for information of the Council
4. Decisions/recommendations of the IT Grievance Redressal Committee (ITGRC) for
information of the Council
5. Review of Revenue position
6. Issues recommended by the Fitment Committee for the consideration of the GST Council
7. Issues recommended by the Law Committee for the consideration of the GST Council
i. Extension of the due date for furnishing the statement in FORM GSTR-8 by
electronic commerce operator for the months of October, November and December,
2018
ii. Extension of last date for allowing migration of taxpayers who received Provisional
Identification Number (PID) till 31st December, 2017
iii. FAQ on Banking, Insurance and Stock Brokers Sector
iv. Amending SOP issued on TDS - Issues on furnishing of return in FORM GSTR-7
by registered persons required to deduct tax at source under section 51 of the CGST
Act for period during which the deductor was not registered
v. Update on the implementation status of the issues referred to the Law Committee
by the GST Council
vi. Request for exemption from provisions relating to Tax Deduction at Source (TDS)
in case of taxable supplies between Government Authority to another Government
Authority or to PSU and vice versa
vii. Amendments to the CGST Rules, 2017
viii. IGST Rules for determination of Place of Supply
ix. Circular to clarify certain issues under GST
x. Circular to clarify denial of composition option by tax authorities and effective date
thereof
xi. Clarification on refund related issues
xii. Clarification on export of services under GST
xiii. Requirement of submission of invoices for processing of refund claims of unutilised
Input Tax Credit (ITC) in FORM GST RFD-01A
xiv. Proposal for centralized Authority for Advance Ruling and centralized Appellate
Authority for Advance Ruling under GST
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xv. Suggestions made for allowing quarterly payment by small taxpayers
xvi. Issuance of a Circular to clarify taxability of medicines and consumables supplied
to in-patients in hospitals during the course of treatment
xvii. Amendments to the CGST Rules, 2017, consequential to notifying the provisions of
the CGST (Amendment) Act, 2018, SGST (Amendment) Act, 2018 and IGST
(Amendment) Act, 2018
xviii. Proposal to extend the due date for availing ITC on the invoices or debit notes
relating to such invoices issued during the FY 2017-18 under section 16(4) of CGST
Act, 2017 till the due date for furnishing of return for the month upto March, 2019
xix. Extension of the due date for furnishing of annual returns in FORM GSTR-9, FORM
GSTR-9A and reconciliation statement in FORM GSTR-9C for the Financial Year
2017 – 2018
xx. Proposal for amendment of Section 50 of CGST Act, 2017 to allow payment of
interest on net cash liability
xxi. Reduction in amount of late fees leviable on account of delayed furnishing of FORM
GSTR-1, FORM GSTR-3B and FORM GSTR-4 for the months/quarters from July,
2017 to September, 2018
xxii. Proposal to extend benefit of composition levy for small service providers
xxiii. Proposal to introduce the new return system on trial basis from 01.04.2019 and on
mandatory basis from 01.07.2019
xxiv. Single interface for disbursal of refund amounts
xxv. Rationalisation of cash ledgers in GST
8. Approval of modifications in Articles of Association (AOA) and Memorandum of
Association (MOA) of Goods and Services Tax Network (GSTN) based on decision of
the GST Council to convert it into a 100% Government-owned entity
9. Status report of work of GoM on Revenue Mobilisation
10. Status report of passage of SGST (Amendment) Bill, 2018 in various States and Union
Territories with Legislatures
11. Reconstitution of membership of the Law Committee, Fitment Committee and IT
Committee for information of the Council
12. Any other agenda item with the permission of the Chairperson
i. Notification to be issued to extend the due date for filing of returns in FORM GST
ITC-04 for the period July 2017 to December 2018
ii. Ad hoc Exemptions Order(s) issued under Section 25(2) of Customs Act, 1962 to be
placed before the GST Council for information
iii. Proposals for boosting real estate sector under GST regime by providing a
composition scheme for residential construction units
iv. Proposal to increase the threshold exemption limit for supplier of Goods
(manufacturers and traders) under GST from existing turnover of Rs. 20 lakh to Rs.
75 lakh and from Rs. 10 lakh to Rs. 20 lakh for Special Category States in a year
v. Proposal for removal of differential rate of GST on lottery run by State Government
and lottery authorized by the State Government
13. Date of the next meeting of the GST Council
Preliminary discussion
3. The Hon'ble Chairperson welcomed the GST Council Members. At the outset, he placed
on record the gratitude of the Council for the services rendered by Shri Amar Agarwal, Shri
Jayant Malaiya, Shri Rajpal Singh Shekhawat, Shri Etela Rajendar and Shri Lalsawta, the
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respective Hon’ble Ministers from the States of Chhattisgarh, Madhya Pradesh, Rajasthan,
Telangana and Mizoram, who had been associated with this transformational change right from
the beginning of the GST implementation. He also placed on record the deep sense of
appreciation and gratitude for the services rendered by Dr. Hasmukh Adhia, the Finance
Secretary as Secretary to the Council, who retired on 30th November, 2018, and for the very
important role played by him in the GST roll out. He welcomed Dr. Ajay Bhushan Pandey, the
new Union Revenue Secretary and ex officio Secretary to the Council. He further informed that
Shri S. Ramesh, the Chairman, Central Board of Indirect Taxes and Customs (CBIC), was
superannuating on 31st December, 2018 and welcomed the Chairman designate, CBIC, Shri P.K.
Das, as a permanent invitee to the proceedings of the Council. He also welcomed Dr. Rajeev
Ranjan, the new Special Secretary in the GST Council Secretariat. He welcomed the new
Member attending the Meeting of the Council, namely, Prof. Ram Shinde from the State of
Maharashtra. He also welcomed Shri K.K. Sharma, Advisor to the Hon’ble Governor (I/C
Finance) of the State of Jammu & Kashmir. He noted that the new Members from the States of
Telangana, Rajasthan, Madhya Pradesh and Chhattisgarh had not come for this Meeting and they
would be formally welcomed in the next Meeting. Thereafter, he invited the Secretary to the
Council (hereinafter referred to as the Secretary) to take up the Agenda items for discussion.
Discussion on Agenda items
Agenda Item 1: Confirmation of the Minutes of 30th GST Council Meeting held on 28th
September, 2018
4. The Secretary stated that some changes were suggested to the draft Minutes of the 30th
GST Council Meeting (hereinafter referred to as the Minutes). He requested Shri Shashank Priya,
Joint Secretary, GST Council to brief the Council regarding the suggested changes.
4.1. The Joint Secretary, GST Council, stated that a written communication had been received
from the State of Odisha requesting to correct a typographical error in the version of the Hon’ble
Minister from Odisha recorded in line 6 of paragraph 14.9 of the Minutes (‘…in addition to 5%
as entry tax…’) as follows: ‘…in addition to 0.5% as entry tax…’. The Council agreed to record
the revised version of the Hon’ble Minister from Odisha in line 6 of paragraph 14.9 of the
Minutes.
4.2. The Joint Secretary, GST Council, informed that during the Officers meeting held on 21st
December, 2018, the Commissioner of State Tax, Kerala had requested to correct a typographical
error in the version of the Hon’ble Minister from Kerala recorded in line 3 of paragraph 14.15 of
the Minutes (‘…and 18% of consumer products were imported from other States…’) with the
following: ‘…and 80% of consumer products were imported from other States…’. The Council
agreed to record the revised version of the Hon’ble Minister from Kerala in line 3 of paragraph
14.15 of the Minutes.
4.3. The Joint Secretary, GST Council, informed that another written communication had
been received from the State of Jammu & Kashmir informing that Shri B.B. Vyas, the then
Advisor to the Hon’ble Governor (I/C Finance) of Jammu & Kashmir had attended the 30th
Council Meeting but his name was not included in the list of participants. The communication
had also pointed out that the then Advisor was nominated by the State Government to represent
the State of Jammu & Kashmir in the GST Council constituted under Article 279A of the
Constitution and his name should be accordingly included in the list of participants. The Joint
Secretary, GST Council, informed that it was proposed to include the name of Shri B.B. Vyas in
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Annexure I of the Minutes (which contains the names of the Hon’ble Ministers attending the
Meeting) with the following note: ‘The representative from Jammu & Kashmir attended the
Meeting on behalf of the Hon’ble Governor of Jammu & Kashmir. The matter regarding exact
status of the Advisor to the Hon’ble Governor (I/C Finance) in the GST Council was under
consideration in consultation with the Union Ministry of Law’.
4.4. The Hon'ble Chairperson observed that prima facie when there is Governor’s Rule or the
President’s Rule and the function of the Government gets taken over, there could not be a
situation in the Council where a State goes unrepresented. He stated that the State would still be
represented by the authority who takes over the affairs of State under the Constitution. Shri K.K.
Sharma, Advisor to the Governor of Jammu & Kashmir stated that Advisors were exercising the
powers of the Ministers.
4.5. The Joint Secretary, GST Council, informed that the issue under clarification was
whether the attendance of the Advisor to the Governor would be as a Member of the Council
with all the attendant rights. In this regard, he brought to the notice of the Council, the Minutes
of the 1st Meeting of the Council wherein the Hon'ble Chairperson had suggested, subject to legal
vetting, that in a State where there is a Proclamation under Article 356 of the Constitution of
India, for the purposes of the Council, the person nominated by the Governor of the State shall
exercise the power of a Minister. The Joint Secretary, GST Council further informed that this
issue had been referred to the Union Law Ministry for legal opinion. He suggested that the
Council could agree to include the name of Shri B.B. Vyas, Advisor to the Governor of Jammu
& Kashmir in Annexure I of the Minutes (which contains the names of the Hon’ble Ministers
attending the Meeting) with the following note: ‘The representative from Jammu & Kashmir
attended the Meeting on behalf of the Hon’ble Governor of Jammu & Kashmir. The matter
regarding exact status of the Advisor to the Governor in the GST Council was under
consideration in consultation with the Union Ministry of Law’. The Council agreed to this
suggestion
5. For Agenda item 1, the Council decided to adopt the Minutes of the 30th Meeting of the
Council with the following changes:
5.1. In line 6 of paragraph 14.9 of the Minutes, to replace the existing version of the Hon’ble
Minister from Odisha with the following: ‘…in addition to 0.5% as entry tax…’;
5.2. In line 3 of paragraph 14.15 of the Minutes, to replace the existing version of the Hon’ble
Minister from Kerala with the following: ‘…and 80% of consumer products were imported from
other States…’;
5.3. To include the name of Shri B.B. Vyas, Advisor to Hon’ble Governor (I/C Finance) of
Jammu & Kashmir in Annexure I of the Minutes (which contains the names of the Hon’ble
Ministers attending the Meeting) with the following note: ‘The representative from Jammu &
Kashmir attended the Meeting on behalf of the Hon’ble Governor of Jammu & Kashmir. The
matter regarding exact status of the Advisor to the Governor in the GST Council was under
consideration in consultation with the Union Ministry of Law’.


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Agenda Item 2: Deemed ratification by the GST Council of Notifications, Circulars and
Orders issued by the Central Government
6. The Secretary informed that during the Officers meeting held on 21st December, 2018, a
presentation was made on this Agenda item informing regarding the Notifications, Circulars and
Orders issued by the Central Government after 28th September, 2018 (date of the 30th Council
Meeting) and till 13th December, 2018 to be ratified by the Council (A copy of the presentation
is at Annexure 3 of the Minutes). He informed that the officers did not raise any point on this
Agenda item and proposed that the Council may ratify the notifications, circulars and orders. The
Council agreed to the same.
7. For Agenda Item 2, the Council approved the deemed ratification of the following
notifications, circulars and orders, which are available on the website, www.cbic.gov.in:
Act/Rules Type Notification Nos.
CGST Act/CGST Rules Central Tax 53 to 66 of 2018
IGST Act Integrated Tax 3 of 2018
UTGST Act Union territory Tax 12 to 15 of 2018
Circulars Under the CGST Act 66 to 74 of 2018
Removal of Difficulty Orders Under the CGST Act 1 of 2018
7.1. The Notifications, Circulars and Orders issued by the Member 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 certain decisions between 28th September, 2018 (when the 30th GST
Council Meeting was held) and 13th December, 2018 (before the 31st Council Meeting). He added
that due to urgency, certain decisions were also taken by obtaining approval by circulation among
the GIC members. He stated that this Agenda item was discussed during the Officers meeting
held on 21st December, 2018 and there were no comments from the officers on the Agenda item.
A presentation covering the issues is attached as Annexure 3. The Secretary invited comments,
if any, from the Members of the Council. There were no comments.
9. For Agenda Item 3, the Council took note of the decisions taken by the GIC during the
period from 28th September, 2018 to 13th December, 2018.
Agenda Item 4: Decisions/recommendations of the IT Grievance Redressal Committee
(ITGRC) for information of the Council
10. The Secretary informed that under this Agenda item, decisions of the IT Grievance
Redressal Committee (ITGRC) taken during its 3rd meeting held on 26th October, 2018 were
placed before the Council for information. The Hon'ble Chairperson desired that the Council
should be briefed regarding the decisions taken by the IT-GRC. Shri Upender Gupta,
Commissioner (GST Policy Wing), CBIC, made a presentation on this subject (attached as
Annexure 3). He informed that the ITGRC was responsible for resolving problems of taxpayers,
who have not been able to file their documents, such as TRAN 1, GSTR-3B, GSTR-1 or
Registration/Migration, etc. due to technical glitches at the common portal (GST Portal) and it
affects a large section of taxpayers. In this regard, Government had issued circular 39/13 dated
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3/4/2018 prescribing the procedure for taxpayers for lodging their grievance due to technical
glitch in the GST system. He stated that the GSTN had issued a Standard Operating Procedure
(SOP) dated 12.04.2018, which had to be followed by the Nodal Officers of the States/Centre
while referring the technical glitch cases to the GSTN. Taxpayers had to submit their grievance
applications relating to technical glitches to the designated State/Central nodal officers along
with evidence, who in turn examined the taxpayer’s applications and the supporting evidence and
if any prima facie evidence of technical glitch was found, these were sent to the GSTN Nodal
Officer with their recommendations by email. He informed that the 3rd meeting of the ITGRC
was held on 26th October, 2018 and after examination of 268 TRAN-1 cases, the ITGRC decided
to allow 70 cases. He informed that wherever ITGRC approved a case, TRAN-1 filing was
enabled in the system for that taxpayer and an email was sent by the GSTN to the taxpayer asking
him to file TRAN-1. He added that the remaining cases were being examined by the GSTN and
would be sent to ITGRC for decision.
10.1 The Secretary informed that discussion on this Agenda item was held during the
Officers meeting held on 21st December, 2018 where the Commissioner (State Tax), Tamil Nadu,
had raised an issue that in many cases, entries could not be made in TRAN-1 etc. due to bonafide
errors on part of taxpayers which were not due to technical reasons but needed to be resolved and
be considered by the ITGRC. However, while examining this issue, the Law Committee had
suggested that if any modification was allowed in TRAN-1 on account of such considerations,
this could open flood gates and the cases which had already been rejected could also be reopened.
Hence, it was decided to further deliberate on this issue in the next meeting of the Law
Committee, which could be attended by the Commissioner (State Tax), Tamil Nadu and any other
State, which wanted to participate in the meeting. The Secretary invited any other comments
from the Council Members on this Agenda item. However, no comments were offered.
11. For Agenda Item 4, the Council took note of the decisions taken during the 3rd meeting
of the ITGRC held on 26th October, 2018. The Council further agreed that the issue regarding
expanding the mandate of the ITGRC to cover non-technical glitch cases shall be discussed in
the next meeting of the Law Committee where the Commissioner of State Tax, Tamil Nadu and
any other Commissioner of State Tax wanting to attend the meeting shall be invited.
Agenda Item 5: Review of Revenue position
12. The Secretary invited Shri Ritvik Pandey, Joint Secretary, Department of Revenue
(DoR), to make a presentation on this Agenda item. The Joint Secretary, DoR gave a broad
picture of the GST revenue from September, 2018 to November, 2018 and also the trend of return
filing of GSTR-3B till due date and till date for the return period upto October, 2018. He also
informed that a corrigendum had been issued and circulated in Volume-3 of the Detailed Agenda
Notes making corrections in Table 4 of the Agenda Item showing trend of GSTR-3B filing where
the figures in the last two columns had got jumbled up inadvertently. On the revenue position,
he stated that the total GST revenue during September, 2018 was Rs.94, 442 crore, during
October, 2018, it was Rs.1, 00,710 crore and during November, 2018, it was Rs.97, 637 crore.
He further stated that the IGST settlement during September, 2018 was Rs.29, 210 crore, during
October, 2018, it was Rs.62, 597 crore and during November, 2018, it was Rs.33, 966 crore. He
informed that the ad hoc settlement was now being done once in every two months and this would
continue in future too. He stated that the balance IGST available with the Central Government
after settlement/provisional settlement/refund as on 1st December, 2018 was Rs.17,262 crore.
The Hon'ble Chairperson observed that now no large amount of IGST was getting accumulated.
The Joint Secretary, DoR, informed that the accumulation of Rs.9,108 crore was also only
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because refund data was not available; otherwise, the accumulated amount would have been even
lower.
12.1. Shri V. Narayanasamy, Hon'ble Chief Minister of Puducherry, stated that the Union
Territories of Puducherry and Delhi had been recognised as State under the GST law but they
were kept out of the devolution scheme of the Finance Commission, which was not justified. He
emphasised that these two Union Territories must get their due share from the Government of
India. He pointed out that since the amount went to the Consolidated Fund of India, these two
Union Territories became disentitled to get a share of the revenue. He emphasised that since the
money was collected by way of taxes, they should also get a share of the same. He stated that
the present situation was unjustifiable and requested the Hon'ble Chairperson to find a solution
to this problem.
12.2. Shri Manish Sisodia, Hon'ble Deputy Chief Minister of Delhi, stated that for the
settlement to be done for accumulated amount prior to March 2018, the fund was kept in the
Consolidated Fund of India. The fund was devolved to all the States in accordance with the
Finance Commission’s recommendation and they got no share of the funds so devolved to the
States. Joint Secretary, DoR, explained that during the last financial year, the whole system of
ad hoc settlement started late and as result, they could do only one instalment of ad hoc
settlement. The quantum of balances lying in the credit ledger of taxpayers was more and this
amount would come down only when taxpayers utilised the input tax credit to pay CGST and
SGST, which would lead to regular apportionment for IGST amount. He stated that now ad hoc
settlement of IGST was being done even if the input tax credit was lying in the taxpayers’ credit
ledger. The Hon'ble Deputy Chief Minister of Delhi agreed that in the system being presently
followed, all the States including Delhi and Puducherry were getting the due money but Delhi
did not get full amount due to it before March, 2018. The Secretary stated that there was only
one ad hoc settlement during the last financial year and the net amount accounted in the
Consolidated Fund of India had to be devolved to the States by 31st March 2018. He explained
that from the current year onwards, the situation would be different as ad hoc settlement was
being done regularly. The Hon'ble Deputy Chief Minister of Delhi stated that earlier too, he had
raised this issue several times in the Council. He stated that it was earlier decided that Rs.1.60
lakh crore of IGST would not be kept in the Consolidated Fund of India but the same was
suddenly taken in the pool of the Consolidated Fund of India and got devolved to all States except
Delhi and Puducherry. Joint Secretary, DoR explained that as per Constitutional provisions,
IGST has to be credited to the Consolidated Fund of India at the first instance itself and it is not
the case that IGST amount was transferred to the Consolidated Fund at some later stage.
12.3. The Hon'ble Chairperson stated that during the first year under GST regime, there was
a high backlog of IGST and there was only one ad hoc settlement due to which net amount of
Rs.1.6 lakh crore was accounted under the IGST head. He observed that this amount was being
credited to the Consolidated Fund of India not on account of any arbitrary decision but by virtue
of the Constitutional provision. He stated that this situation would not arise in future years. The
Hon'ble Deputy Chief Minister of Delhi stated that a way out must be found to settle the past
amount as Delhi and Puducherry could not be treated differently vis-à-vis other States.
12.4. The Hon’ble Chief Minister of Puducherry stated that when the issue was raised in the
Council earlier, assurance was given that after devolution to the States, a portion of the IGST
balance amount lying in the Consolidated Fund of India would be distributed to the Union
Territories. The Hon'ble Chairperson stated that if an adjustment was done at this stage, it would
imply reducing the net amount accounted under the IGST head at the end of the last financial
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year and all States to whom the money had been devolved would also need to surrender the
amount from their State Consolidated Funds. He stated that this would lead to unscrambling the
whole thing. The Joint Secretary, DoR clarified that IGST is not transferred to the Consolidated
Fund of India but it is credited in the same. He added that when a taxpayer deposits liability under
the SGST head, the money is directly credited in the State’s Consolidated Fund; likewise, when
a taxpayer deposits liability under the IGST head, the money is directly credited in the
Consolidated Fund of India.
12.5. The Hon'ble Deputy Chief Minister of Delhi stated that because of the problem of
devolution, the Union Territory of Delhi had lost about Rs. 3,000 crore during the last financial
year. The Secretary stated that had the devolution not taken place and instead adjustment had
been made, to that extent, the UT of Delhi was getting compensation and it would not suffer net
loss. The Hon'ble Chairperson stated that the Hon'ble Deputy Chief Minister of Delhi raised a
point that if Rs.1.6 lakh crore had not been put in the Consolidated Fund of India, Delhi would
have got a higher share of revenue. He suggested that a workable solution could be found out by
discussion between the Revenue Secretary and the concerned Secretaries of Delhi and
Puducherry. The Hon'ble Chief Minister of Puducherry stated that this amount could have been
kept in a separate account as the two Union Territories could not be deprived of their rights. The
Hon’ble Chairperson stated that it was done by virtue of the Constitutional provision.
12.6. Shri D. Jayakumar, Hon'ble Minister from Tamil Nadu, stated that on this issue, they
had also written to the Hon’ble Prime Minister to settle the issue of ad hoc settlement. He added
that their estimate was that they would get additional Rs 3,000 crore for the previous year alone.
Dr. T.V. Somanathan, Commissioner (State Tax), Tamil Nadu stated that the issue was not only
for the Union Territories, 50% of the balance amount lying implicitly comprised SGST. If it had
been settled in ad hoc manner, 50% would have gone to the States including Union Territories
and 50% would have gone to the Centre. He added that when it is devolved, 58% goes to the
Centre and 42% goes to States and nothing goes to the Union Territories. He further stated that
in the case of Tamil Nadu, if the money would have been disbursed by virtue of ad hoc settlement,
they would have not needed any compensation and instead would have got additional Rs 2000
crore last year in GST. He requested that the required correction may be made after adjusting
compensation both for Union Territories and the States even if the net amounts were not large so
that the principles got established. The Hon’ble Chairperson observed that the difference arising
out of ad hoc settlement and compensation may not be high because if more of settlement was
done, then compensation amount would have gone down. The Hon'ble Deputy Chief Minister of
Delhi informed that Delhi had got a compensation of only Rs.250 crore in the previous year
whereas the amount in question was approximately Rs 3,200 crore.
12.7. The Hon'ble Minister from Punjab stated that he was very worried about the revenue
situation of Punjab which had suffered 37% revenue shortfall whereas structurally, nothing
wrong had been observed about the economy of Punjab. His State was doing well on compliance
levels and no alarming tax evasion had been detected. He stated that his advisors had informed
that in Punjab, the rate of taxation in pre-GST regime was much higher and with the advent of
GST, the rates have come down which was also one of the reasons of revenue shortfall. He added
that there were some other issues such as the issue of Place of Supply in the telecom sector, due
to which full revenue due to his State was not coming. He explained that the service providers
like BSNL and MTNL were accounting a large portion of taxes due to his State, to their head
offices in NOIDA based on the address of the suppliers. He suggested that a special group should
be constituted to look at the possible State-wise distortions and suggest ways for augmentation
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of revenue and particularly the revenue which had not been reaching the destination States. He
further suggested that rate rationalisation should be looked at in July, 2022 and not in 2018.
12.8. Dr. T.M. Thomas Isaac, Hon'ble Minister from Kerala, concurred with the points raised
by the Hon’ble Minister from Punjab and stated that the revenue position should be thoroughly
reviewed. He added that the complaint of the Hon'ble Chief Minister of Puducherry should be
seriously deliberated and a Group of Minister (GoM) should be constituted to look into ad hoc
distribution of IGST. He further stated that the overall revenue position of GST was below
expectations, even more so for the Central Government, which raised a serious question
regarding the so-called revenue neutral rate concept that one was supposed to have. He stated
that the trend of overall revenue had been on the downward side and it crossed Rs.1 trillion only
two times since GST implementation. He added that in the last two months, the revenue trend
had come down further. He stated that the revenue trend had been further affected due to slashing
of the tax rates in the Council and the way of implementing it. He observed that as the Finance
Minister of a State, he would not have found it appropriate to slash the rates as frequently as had
been done in the Council. He cautioned that one had to also look at the situation beyond 2022
when there would be no compensation to the States. He added that during the 28th GST Council
Meeting held on 21st July, 2018, (which he could not attend and which was not chaired by the
current Hon'ble Chairperson), the rates of tax on a large number of goods were reduced
competitively and without going through the process of examination by the Fitment Committee.
12.9. The Hon’ble Minister from Kerala further observed that earlier, the principle of fitment
of rates used to be with reference to pre-GST rates but now, in the proposals of the Fitment
Committee, there was no reference to pre-GST rates. He suggested that pre-GST rates should be
indicated in all proposals of the Fitment Committee. He stated that earlier while arriving at the
tax rates in the Council, there was serious discussion regarding the rate structure with differences
of opinion where some Members wanted it to be capped at 18% and some other Members looked
at revenue as well as pre-existing GST rates from the point of equity i.e. equitable distribution of
tax burden. After a very serious debate, the GST rates were arrived at in the Council. He
suggested that before undertaking any further revision in the GST rates, things should be allowed
to stabilise and the exercise of rate revision should not be carried out in every meeting. He stated
that despite his Party’s ideological differences on GST, he had gone along with the Council and
consensus decision. He emphasised that having surrendered the State’s right to tax independently,
he expected that the decisions in the Council should be taken in a deliberative manner. He stated
that his State was a big spender on social programmes and suffered revenue deficit and 14%
annual rate of growth was not enough for his State. He urged that the Council Members should
think twice before undertaking further reduction in tax rates till things stabilised as this was
leading to stagnation of revenue. In this regard, he also shared the concern of the Hon'ble Minister
from Punjab regarding the revenue position.
12.10. The Hon'ble Chairperson invited the attention of the Members to Table 3 of the Agenda
Note, which gave State-wise details of revenue shortfall for the period from August, 2017 to
March, 2018 and April, 2018 to November, 2018. The Joint Secretary, DoR stated that it could
be inferred from the table that the high shortfall States were Puducherry, Himachal Pradesh,
Uttarakhand, Bihar, Punjab etc. The previous Union Finance Secretary had visited the top six
revenue shortfall States and had analysed the reasons for the shortfall. He observed that some of
the big gainers of revenue were the North-Eastern States. Some of the larger States like
Maharashtra, Tamil Nadu, Telangana and Andhra Pradesh were also doing better than the
national average. The Hon’ble Chairperson observed that States like Haryana, Uttar Pradesh,
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Rajasthan, West Bengal and Sikkim had also improved their revenue performance during April,
2018 to November, 2018 as compared to that during August, 2017 to March, 2018. He observed
that as compared to last year, the overall revenue performance was better this year but some
States like Delhi had shown a poor performance this year compared to the last year.
12.11. The Hon'ble Deputy Chief Minister of Delhi stated that one of the reasons for revenue
shortfall in his State was that during pre-GST era, sales from godowns were taxed at the first
point of sale. However, in GST regime, even though the goods were being consumed in Delhi,
the big dealers were setting up their godowns in other States due to competitive land prices and
rentals. He added that there was also loss of revenue on account of lack of input tax credit
matching.
12.12. Dr. Amit Mitra, Hon'ble Minister from West Bengal, stated that it was assumed that in
GST, the consuming States would be better off. However, the data available in GST had not been
analysed in the way it should have been through the technical processes available. There was a
need to relook at the data as to why many consuming States were in a bad revenue position. He
observed that in States like Bihar and Madhya Pradesh, consumption was good but revenue was
not high. Punjab had given up 14% tax on food grains which was discussed at length in the
Empowered Committee. No analysis in theoretical terms had been done that destination tax
should have resulted in higher revenue to the consuming States. There was only some heuristic
explanation for revenue shortfall like shifting of logistics hubs from Delhi. He emphasised that
there should be an analysis based on the original premise of the GST that more revenue should
come to the consuming States. He observed that in one meeting of the Council, which was not
presided over by the present Chairperson, GST rates were lowered competitively.
12.13. The Hon'ble Chairperson observed that analysis should continue and this would help to
understand the trend but at a broader level, it needed to be understood that States like Maharashtra
and Karnataka which were performing well on the revenue front, were not only big
manufacturing States but also high consuming States. Regarding Bihar, as brought out in the
report of the former Finance Secretary, the VAT collection was high for the base year because
of increase in the VAT rate on account of implementation of the Prohibition. In Punjab, loss of
Purchase Tax was a major reason for revenue shortfall. Uttar Pradesh is partly a manufacturing
State but substantially a consuming State where the revenue shortfall had come down to 7%. In
the North-Eastern States, the revenue had increased. The States of Telangana and Andhra Pradesh
had also done remarkably well on the revenue front. He suggested that a study should be done to
analyse these trends.
12.14. The Hon'ble Minister from Kerala stated that the consuming States should have
performed much better in revenue collection. Some manufacturing States were also consuming
States. He added that the CBIC had country wide data and they should bring out an analytical
report. He further stated that prior to GST, Service Tax collection was sub-optimal due to paucity
of staff in CBIC. The revenue collection from Services could be improved in the GST era and
for this, they needed Service Tax collection data of the pre-GST period which should be shared
by CBIC with the States. He added that revenue for consuming States would be based on IGST
which in turn depended upon effectiveness of e-Way bill system and curbing of large-scale under-
valuation of goods like marbles, garments, building material, etc. which would help to augment
GST revenue. He informed that Kerala had earlier a floor price system which had gone and this
was encouraging under-valuation as there was no such system in place. He suggested to review
the rules of e-Way bill system regarding valuation and also address the problem of double run on
the same e-Way bill.
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12.15. The Hon'ble Chairperson stated that revenue from Service Tax post-GST was a
disappointment but there were certain factors responsible for it. He asked Shri Manish Sinha,
Joint Secretary (TRU-II), CBIC, to explain the reasons for the declining trend of revenue from
services. The Joint Secretary (TRU-II), CBIC, stated that at a broader level, three services,
namely real estate, telecom and airlines were not performing well. In addition, revenue from
smaller service providers had gone down, which was partly due to monthly return system, tax
rate on services and hike in the annual turnover threshold for registration from Rs.10 lakh pre-
GST to Rs.20 lakh in GST. Further, small scale service providers were keeping away from GST
because of heavier compliance requirements under GST. He stated that the Service Tax revenue
collected in the year prior to implementation of GST was around Rs.2.85 lakh crore, and in
normal course, this would have touched Rs.3 lakh crore this year.
12.16. The Hon'ble Chairperson stated that in the telecom sector, prices were coming down
because of competition and this had affected the revenue collection. He added that the rate of
18% GST was dissuading small scale sector, such as tailoring units, fitness centres, beauty
parlours, hair cutting saloons, etc. to come into the tax net. In the real estate sector, 12% tax rate
for under-construction projects was perceived to be an additional burden for the buyers while the
finished flats did not attract any GST and only stamp duty. He added that even with input tax
credit, the GST rate of 12% appeared to be dissuading the builders from further investment in the
sector. Funding by Non-Banking Financial Companies (NBFCs) to the real estate sector had also
slowed down. The Secretary stated that from services, tax collection from units with annual
turnover of less than Rs.1 crore was approximately Rs.800 crore per month in cash, and the ratio
of liability versus input tax credit adjusted is about 50%. He observed that small service tax
payers were looking at a scheme of composition and a scheme of composition for small Service
Tax payers was on the Agenda of this Council meeting.
12.17. Continuing with the presentation, the Joint Secretary, DoR, stated that as regards the
trend of return filing, it was significantly lower in October, 2018 as compared to the previous
month. He stated that part of the reason for this was that in October, 2018, the last date of return
filing was extended by five days. He added that as seen from the trends, it could be seen that
many States came in the range of 50% to 60%. He stated that Punjab, UT of Chandigarh, Uttar
Pradesh Gujarat etc. had shown a high level of return filing whereas some Union Territories and
the North-Eastern States had shown a low return filing rate as some of them did not have VAT
before GST.
12.18. Shri Nitinbhai Patel, Hon'ble Deputy Chief Minister of Gujarat, raised a question as to
why revenue collection in some States like Punjab was low even when return filing percentage
was high in these States. The Hon'ble Minister from Punjab stated that they were also not able to
clearly figure out the reason for this. The Hon'ble Chairperson stated that he had received
feedback that in Punjab, bulk of the revenue even on the direct tax side, came from the public
sector undertakings; the local trade and industry was contributing marginally to the direct tax
collection. The Hon'ble Chairperson asked Shri V.K. Garg, Advisor (Financial Resources) to the
Chief Minister, Punjab, to explain the reasons for Punjab’s low revenue collection.
12.19. The Advisor (Financial Resources) stated that the National Institute of Public Finance
and Policy (NIPFP) had conducted two studies in the run up to GST – one in 2011 and the other
in 2013 – where they had indicated that there could be no uniform revenue neutral rate for GST
for the entire country. At that time, States like Gujarat, Chhattisgarh, Himachal Pradesh and Goa
had expressed apprehension that GST would cause a big loss of revenue as they believed
themselves to be the origin States. NIPFP report had indicated that applying a uniform revenue
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neutral rate for the entire country would lead to loss of revenue to some States and had suggested
a high revenue neutral rate for some States like 27% for Chhattisgarh. He added that it was
explained to them that the whole concept of origin and destination tax was a farce in the long run
since if a State was a producing State, sooner or later it would also become a consuming State.
He stated that it could be seen that the State of Gujarat had not lost as much revenue even though
the CST component was high in its pre-GST revenue collection. On Service Tax, he stated that
earlier, large part of Service Tax was levied on B2B payment i.e. between 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 channelised in GST. 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 threshold. He added that due to increase in the annual turnover
threshold for registration for Service Tax under GST, many taxpayers had gone out of the tax
net. He added that major revenue providers in B2C segments were telecom (where revenue was
down) and retail (where tax evasion was traditionally high).
12.20. The Advisor (Financial Resources), Punjab, further stated that during the pre-GST
period (2008-15), the rate of State VAT was originally 12.4% and CST 4% but the rates varied
subsequently among the States as some States started levying 10% surcharge, some raised tax
rates etc. So, GST was rolled out. Most States had a tax rate of 13.5%-14% on a cascaded value
which included excise duty in addition to CST of 2% plus the tax of 4% on stock transfers. Thus,
his estimate was that most of the States had a prevalent tax rate of 18% which had now become
9% (as SGST) and VAT rate of 6% had become 2.5% SGST. This had an impact on the revenue
front. He stated that Punjab had two-fold problem, namely Purchase Tax and mismatch between
ratio of Punjab’s share of GDP in the Country’s GDP and GST revenue vis-à-vis country’s total
GST revenue. He added that share of Punjab in the country’s GDP was 2.8% but its share of GST
revenue was only 2.4%. Since his State was getting lesser revenue than anticipated as per its
share of GDP, this indicated some structural problems. One such problem could be in the Place
of Supply (POS) Rules due to which some revenue of Punjab was going to other States. He gave
an example of POS Rules for international travellers for which the place of supply was where the
passenger embarks on the aircraft, which was mostly a metropolitan city. Similarly, in telecom
sector, for prepaid electronic recharges done through Paytm, if address of the subscriber was not
given, it was deposited in the headquarters of Paytm at NOIDA whereas revenue should have
accrued to the consuming State. He added that as highlighted by the Hon’ble Finance Minister
from Punjab, such distortions should be looked into by a Committee and the revenue should flow
as per the destination principle.
12.21. The Hon'ble Chief Minister of Puducherry stated that his State was a big loser of
revenue under GST. He stated that earlier, his State attracted consumers from other States and
several warehouses were located in his State. The previous Finance Secretary had met officers
during GST roll out and he had indicated that GST would benefit the consuming States but now
the experience was that all revenue of small industries was going to other States for sale. His
State was also not getting Service Tax revenue, as per expectation. The tax rate on restaurants
had been reduced, and during the last year, about 1,700 restaurants had been opened in his State
but they were not getting much revenue from this sector. He stated that a proper analysis needed
to be done for such loss of revenue and his State was not in a position to carry out such analysis.
12.22. The Hon’ble Chairperson enquired regarding the reasons as to why there was a positive
trend of revenue in the State of Maharashtra. Shri Rajiv Jalota, Commissioner, State Tax,
explained that his State was a high service consuming State and during the first year of GST, the
revenue collection was good. He stated that now there was a downward trend in revenue from
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service sectors like telecom and airlines. He added that under VAT, there was a composition
scheme in his State for manufacturers and now there was a declining trend in revenue from this
segment because there was just 1% of composition tax. He added that traditionally Maharashtra
has been a better compliant State. However, it had also been noticed that large amount of tax
credit was being used through circular transactions and they were trying to improve tax
compliance through better data analytics.
12.23. The Hon’ble Chairperson stated that the revenue target of the States was high as it was
pegged at a compounded rate of 14% of the revenue of the base year which would amount to
almost 50% increase in the revenue target of the State in the next three years. So, increase in
revenue collection would need to be in the range of 40% to 45% of the previous collection which
was very high. The Hon’ble Minister from West Bengal stated that it was true that his State had
performed better in revenue collection. This was partly due to large scale use of e-taxation prior
to GST roll out which was also acknowledged by the Government of India. He stated that this
had led to easier migration of middle and larger level VAT registrants and the number of new
taxpayers had also climbed up rapidly. He added that a lot of work had also been done by officers
for augmenting revenue. However, due to non-matching of invoices, lot of false claims of input
tax credit were being made and a holistic approach was needed to address this problem. He
suggested that instead of ocularly looking at data and comparing them, there should be an analysis
through statistical tools like chi square to analyse any statistical difference of collection figures
between the two periods indicated in Table 3.
12.24. The Hon’ble Minister from West Bengal further observed that the Hon’ble Ministers
from Punjab and Kerala had rightly observed that the GST rates were being varied without much
logic. He stated that West Bengal has a metropolitan city and therefore it is a consuming hub but
they also had manufacturing and digitisation. He wondered whether they could say that they were
doing better. He observed that there were some heuristic reasons for revenue shortfall like re-
location of warehouses from Delhi due to lesser land prices in neighbouring States but we lacked
analysis of such reasons. He added that during last year, the States were compensated to the tune
of Rs.48,000 crore which could be even higher during the current year and it needed
consideration whether GST rate reduction was also a cause for this shortfall. He recalled that
during the GST design phase, States of Gujarat and Maharashtra had very strongly opposed GST
but now they were performing well. He added that these were some contradictions which were
not yet understood. The Hon’ble Minister from Kerala added that at their insistence, initially
there was also a proposal to allow retention of 2% additional tax to the producing States.
12.25. The Hon’ble Chairperson enquired whether CBIC could do a data analysis of revenue
shortfall. Shri Mahender Singh, Member (GST), CBIC stated that they had done some study and,
after refinement, this could be brought before the Council. The Hon’ble Minister from Kerala
suggested that there should be a Committee of officers of the Centre and the States to do such an
analysis and help should also be taken from some research institutions like National Institute of
Public Finance and Policy (NIPFP). He suggested that a GoM should be constituted for revenue
analysis and this should be supported by officers. The Hon’ble Minister from West Bengal stated
that the experts should do the analysis and then it should be brought before a GoM.
12.26. The Hon’ble Minister from Karnataka stated that revenue from service tax was not
supplementing their revenue. His State was a big producer of services (mainly IT) and not much
in manufacturing like Maharashtra. With regard to data analytics, he informed that in the GoM
on IT Challenges in GST Implementation, he had repeatedly been requesting for analysis about
trends and correlations but the analysis presented did not answer questions being raised. He
observed that since GSTN was not able to carry substantial assessment, it needed to be considered
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as to what kind of group should conduct this analysis. Shri Jagdish Chander Sharma, Principal
Secretary (E&T), Himachal Pradesh stated that revenue gains for the consuming State like theirs
was not as expected. He added that due to strong enforcement, they had collected about 21%
more revenue from IGST and SGST during September-October 2018. His State had a better
national average of e-way bill generation as compared to the registered taxpayers in the State. He
expressed that in the next three months, with better enforcement, their revenue performance
should improve. He also supported the formation of GoM for revenue analysis.
12.27. The Hon’ble Minister from West Bengal stated that the analysis should consist of three
things namely data mining like chi square test, causal modelling through regression analysis and
examination of the structure under which it is happening i.e. the IT structure. He suggested that
either a white paper should be published on GSTN or a GoM should be constituted to examine
these issues. He added that about 300 crore invoices were supposed to be uploaded per month on
GSTN portal and these were supposed to be matched but we had not been able to go to the stage
of GSTR-2 and therefore frauds were being committed. He also observed that no single test or
pilot project was done before launching GST.
12.28. The Hon’ble Chairperson requested the Joint Secretary, DoR to also show the monthly
revenue trends of GST collection. The Joint Secretary, DoR stated that from August 2017 to 31st
March 2018, revenue collection was fluctuating. During August 2017, the collection was
Rs.95,633 crore but it had gone down to Rs.94,064 crore during September 2017. He added that
November 2017 showed the lowest revenue collection of Rs.83,780 crore and thereafter, there
was an increasing trend in revenue. The Hon’ble Minister from Kerala stated that GDP to tax
ratio should also be analysed and in his assessment, this was coming down. He stated that the
turning point for downward revenue trend was 23rd GST Council Meeting held in Guwahati (10th
November 2017) where the GST rates were reduced.
12.29. Continuing the presentation, the Joint Secretary, DoR stated that in April 2018, the
revenue collection was approx. Rs.1.03 lakh crore. In May 2018, it went down to Rs.94, 016
crore and in June 2018, it was Rs.95, 610 crore. The revenue collection in July 2018 was Rs.96,
483 crore, in August it was Rs.93,960 crore, in September it was 94,442, and in October it was
Rs. 1 lakh crore. In November 2018, the revenue collection was Rs.97, 637 crore.
12.30. Summing up the discussion, the Hon’ble Chairperson stated that taking into account the
rate reductions done, the revenue collection figures indicated that the average monthly revenue
collection was about Rs.90,000 crore till March 2018 and it was about Rs.96,000 crore monthly
during the next year. From April 2018 to November 2018, the tax collection ranged between
Rs.94,000 crore to Rs.97,000 crore. The Hon’ble Minister from Karnataka stated that year-on-
year, a nominal revenue growth rate of at least 7% to 8% should be considered, and in this light,
the revenue collection per month should have gone up from Rs.90, 000 crore to about Rs.96, 000
crore to Rs. 97,000 crore and the shortfall needed to be measured against this and not Rs.90,000
crore. The Hon’ble Chairperson observed that to break even, the targeted revenue collection
every month was about Rs.1.10 lakh crore. The Hon’ble Minister from West Bengal stated that
post-refund revenue collection figures should be taken into account.
12.31. The Hon’ble Chairperson suggested that a GoM consisting of about seven members
along with experts from the Central and State Governments and research organisations like
NIPFP could be constituted to analyse the revenue collection and structural issues relating to
revenue shortfall keeping in view the suggestions made by the Members. The Council agreed to
this suggestion.
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13. For Agenda Item 5, the Council took note of the presentation on the revenue collection
for the months of September to November 2018. It also agreed to constitute a 7-Member Group
of Ministers along with experts from Central and State Governments and research organisations
like National Institute of Public Finance and Policy (NIPFP) to analyse revenue related issues
and the structural reasons for shortfall keeping in view the suggestions made by the Members.
Agenda Item 6: Issues recommended by the Fitment Committee for the consideration of
the GST Council
14. Some preliminary remarks were made before substantive discussion on this Agenda item
took place. The Hon’ble Minister from West Bengal stated that he had written a formal letter to
the Hon’ble Chairperson, GST Council on 21st December 2018 regarding the statement made by
the Hon’ble Prime Minister on 18th November 2018, as reported in the newspapers. The Hon’ble
Prime Minister of India’s suggestion on 28% rate slab was like pre-empting the discussion on
fitment issues in the GST Council. He pointed out that under Article 279A of the Constitution,
the Council was authorised to discuss rate structure of GST and stated that this should not happen
in future as this undermines the GST Council.
14.1. The Hon’ble Minister from Assam objected to these observations and stated that the
comments of the Hon’ble Prime Minister should not be discussed in the Council because one
would not be fully aware of the context and background of it. The Hon’ble Chairperson stated
that the Members of the Council should concentrate on the work being done in the Council. He
recounted the past experience where, on a number of items, there was unanimous agreement, but
subsequently some Members talked against the consensus decisions of those very items. He
observed that the Hon’ble Prime Minister had only given a road map and some of the Members
and even few Chief Ministers had spoken of such road maps as these are public issues and
everybody could give their own view but the ultimate decision lay with the Council. He observed
that the environment of the Council should be kept free from the happenings taking place outside
the Council. He suggested to concentrate on the decisions to be taken in the Council and to keep
politics out of it. He added that the Council Members were also political persons and some
political stance could be taken in a democratic setup but in the Council, there should be free and
frank discussion and to evolve a consensus.
14.2. Shri Mauvin Godinho, the Hon’ble Minister from Goa stated that the Hon’ble Prime
Minister was right to comment on the broad economic policy framework of the country. The
Hon’ble Deputy Chief Minister of Delhi cautioned on such kind of debates and also stated that
discussion on GST rate was the privilege of the GST Council. The Hon’ble Minister from
Karnataka stated that there would be more value addition if the members discussed the agenda.
He added that the statement of the Hon’ble Prime Minister could be dissected from various angles
and it needed to be remembered that the Council was a Constitutional body. However, in
deference to the suggestion of the Hon’ble Chairperson, the discussion could move on.
14.3. The Hon’ble Chief Minister of Puducherry stated that the Members should be allowed
to make observations. The Hon’ble Minister from Assam stated that indirectly the Members were
making avoidable observations on the views expressed outside the Council. He added that many
things had been stated against GST and it would be advisable not to bring outside issues into the
Council. The Hon’ble Minister from Goa added that all Members should think and work in a
constructive spirit with a view of one Nation, one Tax.
14.4. After this preliminary discussion, the Secretary introduced the Agenda Item 6. The
Hon’ble Minister from Punjab stated that the Agenda Item listed at S.No.4 of Annexure II
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regarding GST on licence fee charged for liquor licences stood withdrawn but he recalled that
the issue regarding tax on liquor was discussed and decided during the Meeting of the Council
held in Jammu & Kashmir but the implementing circular or notification was yet to be issued to
clarify the matter. Joint Secretary, TRU-II stated that it was decided in the Officers’ meeting on
21st December 2018 that on merit, no decision was needed and only implementation
instrumentality needed to be worked out which would be done at the officers’ level that whether
it should be done by way of a Circular or by way of an exemption notification. He stated that if
liquor licence fee collected by the States was certified as the tax revenue of State excise by all
the States, then it would be easy to issue the required circular. He added that issuing such a
circular for the period relating to erstwhile service tax would tantamount to annulling
judgements of some High Courts on this issue without any new evidence and, therefore, such a
certification was needed from the States.

14.5. Advisor (Financial Resources), Punjab stated that the Hon’ble Supreme Court, in the
case of M/s Har Shankar vs otrs, had decided the issue whether licence fee was a tax or excise
revenue and it had held that it was excise revenue. The then Finance Secretary was convinced
that this was not liable to GST. If instead of clarification, an exemption notification was to be
issued at this stage, the levy would come into question whether it was a fee or a tax. He stated
that since it was a one-time exception, a Circular could be issued. The Hon’ble Chief Minister
of Puducherry stated that fee on liquor licence was not under GST and it need not come for
discussion to the Council at all. He added that notices were still being issued on this issue for
Service tax period and this should also be withdrawn. Joint Secretary, TRU-II stated that wording
of the Law was different in different States. Further, it was not mentioned in the 26th GST Council
decision as to how the decision should be implemented. The Secretary stated that at this time,
this Agenda item was being withdrawn.

14.6. The Hon’ble Minister from Tamil Nadu requested to take on record his written speech
circulated during the meeting and stressed to favourably reconsider the request of Tamil Nadu
to reduce the rate of GST on certain goods such as branded rice, wet grinder, matches, recycled
plastics and also fishing line and lead weights which the Fitment Committee had not agreed to
consider during its last meeting. The Hon’ble Minister from Kerala requested to take up the
agenda item wise in a systematic manner.

14.7. The Secretary explained the contents of Agenda Item 6. He stated that Annexure I
contained recommendations for making changes in GST rates or for issuance of clarification in
relation to goods; Annexure II contained recommendations for making changes in GST rates or
for issuance of clarification in relations to Services; Annexure III contained issues where no
change had been proposed by the Fitment Committee in relation to goods; Annexure IV
contained Issues where no change has been proposed by the Fitment Committee in relation to
services and Annexure V contained issues relating to services referred to GST Council for
decision. He added that issues covered in Annexure V were again discussed by the Fitment
Committee on 21st December, 2018 as there was near consensus in its last meeting on 15th
December, 2018 and after further discussion, the Fitment Committee had reached an agreement
on these issues.
14.8. The Hon’ble Chief Minister of Puducherry enquired regarding the number of items that
were presently in the tax slabs of 18% and 28%. Shri G.D. Lohani, Joint Secretary (TRU-I),
CBIC, informed that at four-digit HSN level, there are altogether 1,216 entries for goods and 48
entries for services. He stated that as regards the contribution of revenue from different rate slabs,
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60% of the revenue came from items in 18% rate slab, 13% of revenue came from items in 12%
slab, 22% of revenue from items under 28% and rest of the revenue came from 5%, 3% and 1%
slabs. He added that 340 tariff lines were taxed at the rate of 5%, 174 tariff lines at the rate of
12%, 517 tariff lines at the rate of 18% and 34 tariff lines in goods are at the rate of 28% and rest
are at lower rates. He further added that sometimes one tariff line may spread into different slabs
for example parts of auto, etc. The Hon’ble Chairperson stated that in 28% tax slab, there were
broadly three categories of 34 items left, as for example, auto parts which may figure in 13
headings or so and tobacco in 4-5 headings. He added that out of these 34 items, several items
were falling in the categories of luxury and sin products. He stated that two items involving big
revenue collection in 28% slab were cement and auto parts. If the rate of tax on cement was
reduced from 28% to 18%, it would lead to annual revenue loss of Rs.13,000 crore and if the tax
rate on auto parts was reduced from 28% to 18%, it would lead to an annual revenue loss of
Rs.22, 000 crore. He stated that some of the other items of lesser revenue significance were yacht,
luxury cars, etc. Therefore, items under the 28% rate category could be categorised separately
into (i) luxury and sin products; (ii) items of big revenue impact; (iii) some items of minimal
revenue impact.
14.9. The Hon’ble Minister from Karnataka stated that he would briefly like to delve on the
larger issue of revenue and rate. He stated that taking a cue from the concerns raised by the
Hon’ble Minister from Punjab, Kerala, etc., in his opinion, rate rationalisation should happen but
the question was regarding the timing. He stated that the Council had collectively decided to keep
the 28% rate slab as one did not have a fully progressive tax system from which presently 22%
of revenue accrued, and they were concerned about the revenue position of the States. He stated
that Karnataka has been a fiscally prudent State and it achieved its revenue deficit target under
the Fiscal Responsibility and Budget Management (FRBM) Act in 2004, though the target year
was 2005-06. Karnataka has also consistently been a revenue surplus State and its fiscal deficit
had been 2.1% to 2.8% whereas many States had crossed the 3% mark. In terms of share of his
State’s GSDP, it was 17% in 2013-14 and today it stood at 18.7%. He stated that in 2014-15, the
revenue growth was 13.91% and in 2015-16, it was 9.8%. He added that the State had now been
suffering a consistent revenue shortfall of 21%-22% below the protected revenue rate. He added
that the revenue protection was below the previous VAT growth rate. In the pre-GST period, the
VAT growth rate for various years was as follows: 19.43% (2006-07), 15.75% (2007-08), 5.25%
(2008-09), 11.98% (2009-10), 27% (2010-11), 23.90% (2011-12), 13.70% (2012-13) and
14.98% (2013-14).
14.10. The Hon’ble Minister from Karnataka further stated that when the State was solely
responsible for its tax policy, its revenue growth was high and it was expected that in GST, there
would be greater tax buoyancy whereas now the revenue growth stood at 7%-8% in nominal
terms. The State had surrendered its sovereignty by implementation of GST on the understanding
of higher revenue gains. He stated that as per the present rate of revenue shortfall, in 2022, the
State would suffer a sudden drop of revenue of about Rs.10,000 crore. He stated that there was
not enough convincing answer that the structural issues would be addressed. He added that the
solution was to reach revenue neutrality and for this, monthly revenue collection should be
between 1.08 lakh crore to Rs. 1.10 lakh crore for the country. Karnataka, on its part, was
committed to work towards achieving this goal. He stated that the tax rate rationalisation could
be looked at after the targeted revenue was assured. He stated that the Hon’ble Chief Minister of
Karnataka was worried as to how to mobilise revenue after 2022. He was very seriously
concerned about the evolving medium-term financial condition of Karnataka. He suggested that
firstly a road map should be shown as to how the revenue would be assured and then one could
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go ahead with rate rationalisation. If there was no road map and revenue rationalisation was still
proposed to be carried out, then revenue protection to the States should be assured beyond 2022.
14.11. The Hon’ble Minister from Kerala stated that the growth of VAT revenue in his State
during the year 2006-07 to 2013-14 was in the range of 18% and then it dropped, partly because
initially the Entry Tax had been struck down by the Hon’ble High Court and there was own
account purchase from the neighbouring States on large scale. It was expected that GST would
enable his State to reach a growth rate of 18% and help in fiscal consolidation. However, the
trend in 2013-14 showed worsening of fiscal equilibrium. He stated that revenue must be
protected. He added that decline in revenue started after the GST rates were slashed and the tax
to GDP ratio had come down sharply. He stated that the Members of the Council had different
understanding on the issue of GST rates but they had reached a common ground. He stated that
in the Council, the revenue potential should not be undermined. Some tweaking in the rate could
be done but there should be no major rate changes. He added that some increase in the GST rates
could also be discussed after the General Elections in 2019.
14.12. The Hon’ble Deputy Chief Minister of Delhi stated that it was not necessary that in
every Council meeting, the rates should be reduced. He observed that in the earlier meetings of
the Council, rates of many items had been reduced. He suggested that the Council should
postpone proposals for changes in tax rates. He further added that without due analysis, the
change in the rates would either be based on some convention or populist decisions. In this regard,
he drew attention to the proposal regarding reduction in the rate of tax on marbles, and stated that
the differential between marble pieces and marble slabs would cause a problem.
14.13. The Hon’ble Deputy Chief Minister of Gujarat stated that at the beginning of the
implementation of GST, it was decided to keep a rate slab of 28% and to review the same as per
need and experience. The changes in tax rates could be considered based on representations
received from customers, manufacturers, or other stakeholders. He added that now more than one
year had passed since the implementation of GST and the impact of the rates on the revenue trend
and on the people at large could be seen. He advised that the process of rate rationalisation should
not be stopped and suggested that the proposals of the Fitment Committee should be discussed
one by one and decision taken on each of them. He stated that tax rate of 28% was not desirable
for all items and recalled that initially, there was a demand in the Council not to keep the tax slab
of 28%. Now, when the Hon’ble Chairperson and the Fitment Committee had suggested to reduce
the rate of 28% on some items, it should be considered where ever the agreement could be
reached. He added that such reduction would help to boost business turnover resulting in more
revenue, more compliance and lesser evasion.
14.14. The Hon’ble Chief Minister of Puducherry wondered how revenue shortfall of the
States could be met if tax rates were reduced even if their original demand was to lower the rates.
He added that States had revenue protection for five years out of which one year was already
over. There would be no compensation to States after five years. He supported the view of the
Hon’ble Ministers from Karnataka and Kerala that the States should be given an assurance by
the Council that the revenue protection shall be extended by another five years. He observed that
in case of reduction in rates, revenue would come down, and therefore, protection to the States
should be extended by another five years.
14.15. The Hon’ble Minister from Goa stated that decisions in the Council had been taken by
consensus and to the satisfaction of the majority of the Members. When rates were proposed to
be reduced, some Members opposed the proposal but consensus had emerged. He recalled that
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from the beginning and in the subsequent meetings a broad consensus had emerged to rationalise
the rates and have one common rate and a higher rate for demerit goods. He observed that now
that GST had started to stabilise and was working well, there was a general admiration for it in
the world. He stated that the average monthly revenue collection of Rs.97,000 crore was reaching
close to Rs.1.00 lakh crore and the target of Rs.1.10 lakh crore was not unachievable. If rates of
taxes were reduced, there would be less leakage, more compliance and more revenue collection.
In this regard, he complimented all the Members for adopting a positive approach in the Council.
He also expressed agreement with the concern of the Hon’ble Minister from Punjab and stated
that the reasons regarding revenue shortfall should be analysed from all angles. In spite of high
compliance in a State like Punjab, it needed to be investigated why revenue was down and
whether this revenue was going somewhere else. He stated that with the level of consumption
and manufacturing capacity that India has, GST legislation was working well, which was also
attested by the healthy revenue figures. Forms and returns were being rationalised. In the long
run, one should try to have one rate except for sin goods, as is prevalent in other countries.
14.16. Shri Rajesh Kumar Agarwal, Hon’ble Minister from Uttar Pradesh, stated that GST
Council is a Constitutional body. The Fitment Committee had made its recommendations after
due consideration and these should be accepted, particularly for items like fly ash. Shri Sushil
Kumar Modi, Hon’ble Deputy Chief Minister of Bihar, stated that he worked as Finance Minister
during introduction of VAT in 2005 and at the time of implementation of VAT, compensation
was only for three years, that too in a graded manner. However, the experience was that after two
years, no State needed compensation. He observed that in GST too, the revenue shortfall had
declined from 20% to 10%. The smaller States had done well in revenue collection. The
manufacturing States, who were most fearful about revenue prospects in GST, had also done
well. The Hon’ble Minister from Karnataka pointed out that the figure of 10% was not a weighted
average figure and so it did not reflect the total revenue, and that the weighted average for the
same period was 16% and 13% respectively. The Hon’ble Chairperson observed that there was
improvement over the last year even though the figures were not pro rata for the States. The
Hon’ble Deputy Chief Minister of Bihar continued and stated that going by his experience of
VAT, he expected that revenue shortfall in GST would gradually come to zero. He added that
the Fitment Committee had recommended reduction in tax rate on items like fly ash blocks,
walking sticks, agglomerated cork, etc. There was a consistent demand for rationalisation of rate
in the case of footwear and in the recommendation, it was stated that it would also address the
issue of evasion. Tax rate on cement and auto parts could not be reduced because of significant
revenue implications. He added that reduction of GST rates on those items which have no major
revenue implication could be supported. He stated that it would be useful to prune the list of
items under 28% tax slab and on this issue, he supported the proposal of the Fitment Committee.
14.17. The Secretary informed that in respect of Serial No.5 at page 9 of Volume-2 of the
Agenda notes, a corrigendum had been issued and circulated to all the Members (part of Volume-
3 of Agenda notes). In the corrigendum, it was stated that against Serial No.4, in place of HSN
code “6601”, the HSN code “6602” should be substituted (in Columns 3 and 6) and against Serial
No.5 in the comments column in paragraph 7, in place of “the rate of 5%/12%”, the “rate of
5%/18%” should be substituted. The Joint Secretary (TRU-I), CBIC, further clarified that on
footwear, the rates of 5% and 18% were based on the retail sale price but taxation on garments
and hotels were based on transaction value. So, in the case of footwear also, there was a demand
to levy tax on transaction value and not on retail sale price so that when footwear was sold at a
discount on the printed price, the tax would be charged on the transaction value. He clarified that
there was no proposal to change the rate of tax on footwear. The Hon’ble Chairperson observed
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that during 8 months of the last year, the compensation paid was about Rs. 48,178 crore on an
average of Rs 6,000 crore per month, which amounted to about Rs.72, 000 crore annually and if
the same figure was extrapolated for this year, then it would amount to approximately Rs. 83,000
crore in the current year. He stated that the compensation paid this year so far in the first 6 months
was Rs.30,000 crore and for the whole year, it was expected to be Rs.60,000 crore. This indicated
that the revenue position was improving.
14.18. Shri C.P. Singh, Hon’ble Minister from Jharkhand, stated that he had been attending the
Council Meetings since very beginning and many Members who, in the past, had suggested rate
reduction were today expressing reservation to reduce the rates. He stated that this was
understandable politically. On merits, there could be reservation for reducing the rate of tax on
items such as billiards but there could be no objection to reduce the rate of tax on items like
walking sticks, fly ash blocks, etc. He expressed his support for the proposals for tax reduction.
He also suggested that the small print media should be exempted from tax while they should
continue to pay tax on advertisements, ink boxes, etc. He further stated that the chambers of
commerce had indicated that interest for short payment of tax was being charged for the full
amount of tax whereas, it should be charged only on the amount outstanding for payment. The
Hon’ble Minister from West Bengal clarified that he did not oppose reduction in the rate of tax
on walking sticks.
14.19. Captain Abhimanyu, the Hon’ble Minister from Haryana, stated that he had attended all
31 GST Council meetings and was privileged to learn from the diversity of views expressed by
the Members of the Council and there was always an occasion to learn from the senior Members.
Consensus had been established as a convention in the Council. His State was also a fiscally
prudent State. When GST was introduced, it was a plunge into the unknown. Originally, the GST
rate proposed across the political spectrum was 18%. Slowly, over a period of time, the Council
had moved towards the present rate structure and the Fitment Committee had made
recommendation for rationalisation of tax rates on some of items. This was a continuous exercise
which involved removing distortions, lowering tax rates etc. which would in turn improve
compliance, widen tax base and formalise the economy and ultimately lead to gains in terms of
revenue. Therefore, his State supported the proposals of the Fitment Committee. He added that
regarding revenue protection, each State individually and collectively needed to take certain steps
to improve compliance, remove distortions and plug the revenue gap.
14.20. The Hon’ble Minister from West Bengal stated that the earlier decision to do a study
through data mining to understand causes of revenue decline should be conducted within a
timeframe. At this stage, the Council did not have the perspective to start considering rate
reductions. He also enquired regarding the possible loss of revenue due to the rate reductions
proposed in the Agenda. The Secretary informed that the estimated loss of revenue due to the
proposed rate changes for goods and services would be approximately Rs.5, 500 crore annually.
The Hon’ble Minister from West Bengal stated that the general sense was that some States were
in serious problem and it needed to be considered whether any change in the rates should be done
at this stage when States were in problem. However, if rates had to be changed only for those
items which was recommended by the Fitment Committee, then he was in support of it. He
expressed his reservation on the practice of placing some Table Agenda directly in the Council.
He did not support such Table Agendas and stated that it should always come through the Fitment
Committee or the Law Committee. He further stated that the other option was that once the study
was completed, action could be taken on the recommendations of the Fitment Committee. He
stated that his first preference was to understand the issues after the study was conducted and
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then the Fitment Committee to make its recommendation. He suggested that in any situation, at
least the decision regarding the Table Agendas should not be taken up by the Council.
14.21. The Hon’ble Minister from West Bengal further stated that input tax credit had been
allowed on textiles but it was still not allowed for railway wagons. The tax on inputs for wagon
making was at the rate of 18% whereas wagons were taxed at the rate of 5%, which led to
accumulation of input tax credit. For textiles, refund of input tax credit had been correctly
allowed and the same should also be considered for wagons. He stated that in its absence, big
producers as well as SMEs would collapse. The Fitment Committee should take up this item and
any other item of this nature where no tax refund was permitted due to inverted duty structure.
14.22. The Hon’ble Minister from Kerala stated that those Agenda items for change in rate,
which had not gone through the due process of examination by the Fitment Committee should
not be taken up at all. If the Hon’ble Chairperson decided that the Council should look at the
recommendations of the Fitment Committee, he was willing to go along with that. He added that
in the real estate sector, works contract contributed almost 20% of the revenue to their State and
one had to understand its implications before any decision was to be made.
14.23. Shri Shashi Bhusan Behera, Hon’ble Minister from Odisha, stated that his State was a
consuming State, and after five quarters of introduction of GST, there was a discussion on pros
and cons of rate reduction. He added that after the five-year period of compensation with 14%
annual growth rate was over, it was important to consider what will be the revenue position of
the State. He added that his State was a mineral bearing State for which they used to charge VAT
at the rate of 5% but now they got SGST at the rate of 2.5%. As a result, tax on this item had
gone down from Rs.1,400 crore in a year to about Rs.700 crore. They were also losing revenue
on cereal items like rice to the tune of Rs.500 crore-Rs.600 crore. He stated that one needed to
consider what would happen after the assured compensation period was over. He added that his
Chief Minister had written a letter to the Hon’ble Chairperson regarding taxation of tendu leaf.
The erstwhile VAT rate was 5% but now it was taxed at the rate of 18% since it as connected to
sin good i.e. Bidi. He stated that 8 lakh tribal people were losing livelihood. They needed support
because their market was going down due to such high rate of tax. He suggested that the Fitment
Committee should look at this item positively so as to take care of the problem of tendu leaf
collectors. He added that the recommendations of the Fitment Committee were narrowing the
problems but, in some cases, proper analysis should be done before discussion in the Council.
14.24. The Hon’ble Minister from Assam stated that the annual growth of revenue in GST had
been pegged at 14% whereas initially discussions also took place to analyse and consider the
average of the last three years of pre-GST revenue for safeguarding the revenue of the States. He
stated that the assured 14% annual growth rate was a generous gesture by the Centre and it was
very challenging to reach 14% growth rate year-on-year basis in the present conditions. He
observed that the recommendations of the Fitment Committee were not very heavy and these
were limited to small items like walking sticks, music books, etc. The principle being suggested
to first do a study and then consider rate reduction need not be adopted as the Council was
competent to take decisions. He stated that today a grim picture was being painted and it was
being linked to 2022 and several Members who had earlier supported the rate reductions were
opposing it today. He suggested that the recommendations of the Fitment Committee should be
discussed one by one and the Council should reject those proposals for rate reduction where the
revenue loss was high. Rejecting all the proposals would lead to loss of dynamism of the Council.
As regards the Table Agenda, he stated that the proposal to raise the exemption threshold for
GST was not a Fitment Committee issue and could come like any other agenda. He observed that
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in the garb of some principle, the rate reduction should not be stopped. He added that, as observed
by the Hon’ble Minister from Jharkhand, it was understood politically why this was being done.
He also added that some persons had suggested that all items should be taxed at the rate of 18%.
14.25. The Hon’ble Chairperson observed that the practice in the Council was to remain
detached from the debate that went outside the Council and to decide the issues on merit and after
a frank discussion. The Hon’ble Minister from Punjab stated that the bottom line was that India
should become a super power in their own life time. He added that mother India had several sons,
with different names, like Punjab, Jharkhand, Assam, etc. Nobody had come in the Council to
insult others and that was left for the Assembly and the Parliament. He reminded that power and
strength would not always be with one political party. He added that decisions should be taken
with a view to boost the economy, simplify the structure, increase the GST revenue and
rationalise the tax rates. Revenue loss was a nebulous concept and reduction in tax rates on B2B
supplies made no difference. Reduction in tax rates where supplies were pre-dominantly B2C
needed to be looked at carefully. He stated that he would not be really worried if rates were
reduced on steel, parts of commercial vehicles but one should be careful while reducing tax rates
on cars, tobacco, white goods and to some extent the FMCG. He stated that rationalisation of tax
rates would also mean that the rates could go up for certain commodities and suggested that tax
rate could be increased on some items like junk food. He added that all the decisions should be
taken by consensus and within broad principles followed so far in the interest of the nation.
14.26. The Hon’ble Chairperson observed that the Hon’ble Minister from Punjab had summed
up the debate well. The issue was not revenue versus rate rationalisation. One needed to work
for increasing revenue and rationalising the rate but it had to be done slowly so that one did not
take a very big hit on the revenue which one could not afford. Had the 28% rate been abolished
initially, all States would have suffered huge revenue shortfall and so it had been done slowly.
He stated that amongst three categories of goods in the 28% rate segment, there was total
consensus to maintain status quo of rate in regard to two important items which were important
for revenue i.e. cement and auto parts and also on sin and luxury goods. As regards other items,
one needed to see what could be done and what need not be done. He added that the revenue
impact for the proposed rate reductions would be less than Rs.500 crore per month. As regards
the Table agenda, he stated that the Council should discuss to understand their implications even
if it was not decided during this meeting.
14.27. After these discussions, the Secretary invited the Joint Secretary, TRU-I to take up
discussion on the items covered under different Annexures of the Agenda Note. The discussions
that took place on specific issues is recorded herein below.
Annexure I (Part ‘A’)
Pulleys, Transmission shafts and cranks, gear boxes etc. (S.No.1):
14.28. The proposal was to reduce the rate of tax on these goods from 28% to 18%. The
Hon’ble Minister from Kerala inquired whether all auto parts would now be taxed at the rate of
18%. The Secretary informed that only the listed items (under HSN 8483) would attract the rate
of 18% whereas others would continue to be taxed at the rate of 28%. He added that if all auto
parts were brought into the rate slab of 28%, the revenue impact would be around Rs.20,000
crore in a year. The Chairperson added that since these items were being used in agriculture
sector, it was being removed from the 28% slab. The Council agreed to the proposed reduction
in rate of tax on these goods from 28% to 18%.
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Footwear (S.No.5):
14.29. The Joint Secretary, TRU-I stated that the proposal of the Fitment Committee was that
the rate of 5% and 18% on footwear should be applied on the basis of transaction value as was
the case for garments and hotels, the other two cases were differential tax rate was applied based
on the value of supply. The Hon’ble Minister from Kerala inquired as to what would be the
revenue loss by this change. The Joint Secretary, TRU-I stated that revenue loss would be
marginal as the rate of tax was not proposed to be changed and only the basis of taxation was
proposed to be changed. The Hon’ble Chairperson added that it was now proposed to charge tax
on the transaction value. The Council agreed to the proposal of the Fitment Committee.
GST on auction proceed of gifts received by President, PM, Governor and CM – proceed
is used for public or charitable cause (S.No.11):
14.30. The Hon’ble Chairperson suggested that for this Agenda item, exemption of GST on
auction proceeds should also apply to gifts received by public servants which would cover
Members of Parliament, MLAs as well as government officials. The Council agreed to this
proposal.
Monitors/Televisions (S.No.15):
14.31. The Joint Secretary, TRU-I stated that it was proposed to reduce the rate of tax from
28% to 18% on monitors and televisions of size up to 32 inches. The Hon’ble Minister from
Punjab stated that this was a white good and rate on this item should not be reduced at this stage.
The Hon’ble Chairperson stated that presently, TVs up to 68 cm size, which was about 2 feet 3
inches and was very small, were not being manufactured in India. A small man’s television was
32 inches screen size and reduction of tax rate was proposed only for television up to this screen
size, and suggested that the proposal may be accepted. The Hon’ble Minister from Karnataka
inquired regarding the revenue implication due to rate reduction on television monitors. The Joint
Secretary, TRU-I stated that the revenue implication estimated was about Rs.1500 crore annually.
He added that reduction in rate on this product was proposed as televisions of up to 68 cm size
hardly existed. The Council agreed to reduce the rate of tax on monitors and televisions of size
up to 32 inches from 28% to 18%.
Power Banks of lithium ion battery (S.No.16):
14.32. The Joint Secretary, TRU-I stated that it was proposed to reduce the rate of tax on this
item from 28% to 18% to reduce litigation and to bring the rate at par with lithium ion battery.
He stated that this item was also used in electric vehicles. The Hon’ble Minister from Karnataka
inquired whether this rate would also be applied to electric vehicle batteries. The Joint Secretary,
TRU-I clarified that electric vehicle batteries of lithium ion were already taxed at the rate of
18%.The Council agreed to the proposal to reduce the rate of tax on Power Banks of lithium ion
battery from 28% to 18%.
Digital cameras and video camera recorders (S.No.17):
14.33. The Hon’ble Minister from Kerala inquired regarding the rationale for reducing the rate
of tax on these goods. The Joint Secretary, TRU-I stated that in today’s time, everyone was using
mobile phone for taking pictures and the sale of video camera had come down drastically and
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revenue from these goods was very low. The Hon’ble Chairperson stated that the revenue
collection on video cameras was only to the tune of around Rs. 5 crore and on digital cameras
was about Rs. 3 crore and in this view, the proposed rate reduction may be accepted. The Hon’ble
Minister from Kerala stated that he did not share the enthusiasm to clean up the 28% tax slab but
for the sake of consensus, he was agreeable to the proposal.
Objects used in Billiards and Snookers (S.No.20):
14.34. The Joint Secretary, TRU-I stated that most items falling under this heading were taxed
at the rate of 12% while some were taxed at the rate of 18%. He added that billiards and snookers
were normally a means of running business and were hardly purchased for personal use. He added
that the revenue involved was small to the tune of Rs. 40 crore annually for the entire entry. He
added that with this rationalisation, eight lines of chapter 95 shall be brought to 18% tax slab.
The Council agreed to the proposal. The Hon’ble Minister from Goa stated that casino games
should also be covered for rate reduction under this heading and that he would give a separate
write-up on this issue.
Temporary importation of Private Road Vehicles under the convention of carnet de
passage (S.No.22):
14.35. The Joint Secretary, TRU-I explained that this proposal was intended to implement the
commitment under an international agreement to which India was a party. It was proposed to
exempt temporary importation of Private Road Vehicles. The Council agreed to the proposal.
Review of 28% list (S.No.23):
14.36. The Joint Secretary, TRU-I stated that rate rationalisation of other goods under 28%
rate slab would be done once the revenue stabilised. The Hon’ble Chairperson observed that
other than luxury and sin goods, cement and auto parts, some of the items left in the 28% rate
slab were air conditioners, dish-washers and molasses. He stated that the impact on revenue of
rate reduction on air conditioners from 28% to 18% would be Rs.2,000 crore annually and on
dish-washers, it would be Rs.161 crore annually. The Hon’ble Minister from Kerala stated that
in future, the Fitment Committee must indicate revenue loss for any proposal of rate reduction as
also the pre-GST rate. The Hon’ble Chairperson suggested that the recommendation of the
Fitment Committee should have a column regarding the amount of revenue involved in the
proposed rate reduction as well as pre-GST rates. The Council agreed to this suggestion.
14.37. The Hon’ble Minister from Kerala stated that rubber wrappers to collect latex should
be taxed at the rate of 5% as it was just a cup. The Hon’ble Chairperson suggested that this could
be taken up in the Fitment Committee. He also added that any other suggestion for rate reduction
should be given in writing. He also suggested that Council could agree to the proposals on rate
reduction where there was consensus amongst officers of the Fitment Committee. The Council
agreed to this proposal.
14.38. The Council agreed to rate reduction of all the items listed at S.No.1 to 22 of Part ‘A’
of Annexure I with the addition in Sl. No. 11 that exemption of GST on auction proceeds should
also apply to gifts received by public servants which would cover Members of Parliament, MLAs
as well as government officials. It also agreed that the proposals of the Fitment Committee
involving rate reduction shall have a column regarding the amount of revenue involved and also
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the combined pre-GST rate. It further agreed that the proposal to reduce the rate of tax on rubber
wrappers to collect latex to 5% shall be considered by the Fitment Committee.
Annexure I (Part ‘B’)
14.39. The Joint Secretary, TRU-I explained that the proposals in Part ‘B’ of Annexure I
related to clarifications, valuation proposals and proposals for consequential changes. The issues
discussed are recorded herein below.
Solar power generating System and other renewable energy system supplied under
Erection, Procurement and Commissioning (EPC) (S.No.1):
14.40. The Joint Secretary, TRU-I explained that this proposal was regarding assigning value
to the supplies falling under S.No.234 of Schedule I in Notification No.1/2017-Central Tax
(Rates), when supplied along with other supplies like services under EPC and goods not covered
under the said entry, and it was recommended to take the deemed value of goods falling under
entry 234 as 70% of total amount charged and remaining 30% value may be deemed as value of
supply of services. He added that it was based on fair estimation of the cost break-up. He stated
that this proposal would eliminate disputes regarding applicable rate of tax on a total solar power
project. The Council agreed to the proposal. The Council also agreed to the other proposals at S.
Nos. 1 to 13 of Part ‘B’ of Annexure I.
Annexure II
14.41. The Council agreed to the proposals contained in S.Nos.1 to 19 of Annexure II,
recommended by Fitment Committee in its meeting of 14th and 15th December, 2018.
Annexure III (List of goods not recommended for change in GST rate):
14.42. This contained a list of 172 items on which the Fitment Committee had not
recommended any change in GST rate.
14.43. The Hon’ble Minister from Uttarakhand stated that he had circulated a written speech
for the Council Meeting. He drew attention to Serial No.10 of Annexure III where the Fitment
Committee did not recommend reduction in the rate for biscuits from 18% to 12%. The Fitment
Committee had observed that biscuits were manufactured in the organised sector as well as by
bakeries etc. and having two different slabs based on the selling price would lead to evasion of
tax and would also have significant revenue implication. In this context, the Hon’ble Minister
from Uttarakhand stated that earlier too, he had submitted that glucose biscuits were energy
biscuits used by the poorer sections of society. He added that low priced biscuits having
maximum selling price not exceeding Rs.100 per kg. was used by these class of people and was
an affordable means of nutrition and was sold in packs of Rs.2, Rs.3 and Rs.5 each. Therefore, a
reduced GST rate for biscuits having sale value up to Rs.100 per kg. would be in the larger
interest of the society. He added that such biscuits were earlier exempted from Central Excise. It
was also relevant to note that GST rate on footwear, apparels and hotels was also based on price-
based classification and a similar provision could be considered for the rate of tax on low priced
biscuits (price not exceeding Rs.100 per kg.). This could be taxed at the rate of 5%. He suggested
that the recommendation of the Fitment Committee rejecting the proposal for reduction in the
rate of biscuits should be reconsidered.
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14.44. The Hon’ble Chairperson stated that any other request for reconsideration of change in
GST rate could be sent in writing and then these could be reconsidered.

Annexure IV
(Issues on services where no change has been proposed by Fitment Committee on 14th and
15th December 2018)
14.45. This Annexure contained 46 items relating to services where the Fitment Committee
did not recommend any change. The Council took note of it.
14.46. The Hon’ble Chairperson stated that any request for reconsideration of change in GST
rate should be sent in writing and then these could be reconsidered.
Annexure V (Proposals referred by Fitment Committee on 14th and 15th December 2018 for
decision by GST Council):
14.47. The Joint Secretary, TRU-II informed that the issues contained in Annexure V were
discussed again by the Fitment Committee on 21st December 2018 and the Committee had
reached a consensus on these issues. The points discussed in the Council on this Annexure is
recorded as below:
Reduction in tax rate from 18% to 12% for GST on third party insurance of goods carrying
vehicle (S.No.1):
14.48. The Joint Secretary, TRU-II stated that the Hon’ble Supreme Court in a recent
judgement had observed that people were not getting third party insurance claims during accident
and the judgement had made it compulsory to take such insurance for three years. He further
stated that during the Officers’ meeting, it was discussed that the most vulnerable groups who
did not get insurance after accident were two-wheeler drivers and pedestrians. The Council
agreed to the proposal.
Reducing the rate of tax on supply of cinema exhibition services (S.No.2):
14.49. The Joint Secretary, TRU-II stated that movies were a common man’s entertainment
and it was proposed to reduce the rate of tax on tickets of price upto Rs.100 from 18% to 12%
and on tickets of price of more than Rs.100 from 28% to 18%. He added that the annual revenue
implication of this proposal was about Rs.900 crore. The Hon’ble Minister from Kerala inquired
as to what was the pre-GST rate of tax on cinema. The Joint Secretary, TRU-II stated that this
ranged between 35% to 55%. The Hon’ble Minister from Kerala stated that while tax was getting
reduced, the States were also being forced into giving compensation to the local governments on
the basis of GST rates. Commissioner (State Tax), Tamil Nadu informed that they levied local
body taxes along with GST on entertainment. The Hon’ble Minister from Karnataka recalled that
earlier, consensus in the Council was to dissuade the local bodies from levying local
entertainment tax. The Hon’ble Minister from Kerala suggested that a corollary decision must be
taken that all cinema tickets should be electronic tickets. He added that the local government had
withdrawn from taxation and, therefore, no revenue was accruing from this account. He added
that the State should be given right to issue electronic tickets. The Hon’ble Chairperson stated
that there should be an enabling power to issue electronic tickets. The Hon’ble Minister from
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Kerala suggested to frame rules in this regard. The Hon’ble Chairperson suggested that the
Council could agree that States are entitled to issue electronic tickets and that the Law Committee
should formulate rules in this regard. The Council agreed to the rate reduction and to the
suggestion made by the Hon’ble Chairperson.
To exempt or reduce GST rate on transport of passengers by air travelling in chartered
flights in respect of religious pilgrimage facilitated by the Government of India under
bilateral arrangement from 18% to 5%.
14.50. The Hon’ble Chairperson stated that this rate reduction was proposed for all religious
pilgrimages facilitated by the Government of India under bilateral arrangement. The Council
agreed to reduce the rate of tax on air transport of passengers in chartered flights, on such
pilgrimages from 18% to 5%.
Annexure VI
Approval of the decisions of the Law Committee pertaining to taxability/GST rate on
services:
14.51. The Council agreed to the proposals contained in this Annexure.
14.52. The Hon’ble Minister from Kerala raised a point that the issue regarding taxability of
Extra Neutral Alcohol (ENA) under GST should be taken at an early date. He added that the
earlier decision of the Council in its 20th Meeting (held on 5th August 2017) was to continue with
the status quo on this issue till the opinion of the Attorney General of India was received. He
added that the opinion of the Attorney General of India had been received months back which
said that GST could be levied for use of ENA for industrial purpose but not food. Some officers
in Kerala were taking an interpretation to impose 18% tax on ENA supplied for manufacture of
potable alcohol as AG’s opinion had been received. He added that lack of clarity on this issue
was creating problem of interpretation at the field level. He suggested that the Council could take
a decision to continue with status quo until the Council took a decision on this issue. The Hon’ble
Minister from West Bengal stated that ENA had two uses and it was to be decided whether ENA
going for manufacture of potable alcohol was liable to be charged to GST. The Hon’ble
Chairperson stated that the status quo may be continued till the issue was decided in the Council.
The Council agreed to this suggestion. The Hon’ble Chairperson also observed that this issue
should be brought before the Council for decision at an early date.
15. For Agenda Item 6, the Council approved the proposals contained in Annexure I,
Annexure II (except S.No.4 which stood withdrawn), Annexure III, Annexure IV, Annexure V
and Annexure VI with the following additions/amendments:
(i) In Sl. No. 11 of Part ‘A’ of Annexure I, to add that that exemption of GST on auction proceeds
shall also apply to gifts received by public servants which would cover Members of Parliament,
MLAs as well as government officials;
(ii) All requests for reconsideration of rate of tax on goods and services to be sent in writing to
the Fitment Committee/GST Council Secretariat;
(iii) Fitment Committee to reconsider the rate of tax on low priced biscuits (price not exceeding
Rs.100 per kg.) and to examine the reduction in the rate of tax on rubber wrappers to collect latex
to 5%;
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(iv) States are entitled to issue electronic tickets and that Law Committee to formulate rules in
this regard;
(v) The proposals of the Fitment Committee involving rate reduction shall have a column
regarding the amount of revenue involved and also the combined pre-GST rate;
(vi) On ENA, status quo to be continued till the Council took a decision on this issue, i.e. Extra
Neutral Alcohol supplied for industrial purpose shall attract GST at the rate of 18%.
Agenda Item 7: Issues recommended by the Law Committee for the consideration of the
GST Council
16. Introducing this Agenda item, the Secretary informed that the issues under this Agenda
item were discussed in detail in the Officers meeting held on 21st December 2018 and a
presentation was also made (attached as Annexure 4). He informed that except for six issues,
the officers were in agreement with the other proposals under this Agenda item. He stated that if
the Council agreed then except the six issues, the Council may approve the rest of the proposals.
The Council agreed to this proposal. He invited Commissioner (GST Policy Wing), CBIC to
present five issues and Joint Secretary, DoR, to present one issue for the consideration of the
Council.

16.1. The Hon’ble Minister from Punjab stated that before commencement of discussion on
these issues, he wanted to draw the attention of the Council to a few issues. He stated that for
Agenda Item 7(v) (Issue No.2) regarding introducing a provision in the GST Law to allow a
buyer to pay tax for the supplies received from a new or unknown buyer, he had been approached
by the rolling mills manufacturers of the Mandi Gobindgarh area, and they requested to allow
them to make payment on reverse charge basis. He added that this proposal could add substantial
amount of revenue and also contribute to ease of doing business. The Hon’ble Chairperson
requested to send a proposal in writing so that the issue could be analysed with due process. In
respect of Agenda Item 7(vii) on the proposal to amend Rule 41 of GST Rules for apportionment
of unutilised input tax credit between entities arising out of the demerger of a company, the
Hon’ble Minister from Punjab suggested that the mechanism to transfer input tax credit between
the new entities should be looked at more carefully. He stated that where a business was getting
demerged, there was little rationale in insisting on the manner of transfer of tax credits as
proposed presently. He suggested that transfer of input tax credit should be allowed on actuals
i.e. only on the basis of the value of those assets on which input tax credit had been availed. The
Secretary suggested that this issue could be re-examined by the Law Committee. The Council
agreed to the suggestion.

16.2. The Hon’ble Minister from Uttarakhand, in the written speech circulated during the
Council Meeting, stated that with respect to Agenda Item 7(v) (issue No.3), in pre-GST period,
in the State of Uttarakhand and Uttar Pradesh, there was a provision of composition for brick
manufacturers to pay in lumpsum in lieu of tax. This provision was based on capacity of the brick
kiln (number of paye) irrespective of the turnover. In GST, a general option of composition is
available to such manufacturers based on turnover rather than capacity. He stated that during the
VAT period, the tax collection from brick manufacturers was Rs.12 crore but in the GST period,
it had declined sharply to Rs.2.71 crore.

16.3. With regard to Agenda Item 7(v) (Issue No.8), the Hon’ble Minister from Uttarakhand
in his written speech stated that there was considerable delay on the part of the Government in
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making payments due to paucity of funds and also the urgency in discharge of welfare
commitments. There is a continuous complaint from works contractors providing services to the
Government about the consistent delay in receiving their payments and it was affecting them
adversely. He stated that it would be in the interest of these contractors to make the proposed
amendment in order to avoid blockage of capital and to prevent them from becoming liable to
pay late fee and interest. He, therefore, urged the Council to reconsider this issue.
16.4. After this preliminary discussion, Shri Upender Gupta, Commissioner (GST Policy
Wing), CBIC made a presentation on the five issues where consensus was not reached during the
Officers meeting held on 21st December 2018.
(i) Agenda Item 7(xiv): Proposal for centralized Authority for Advance Ruling (AAR) and
centralized Appellate Authority for Advance Ruling (AAAR) under GST
16.5. The Commissioner (GST Policy Wing), CBIC stated that the Authority for Advance
Ruling (AAR) in different States were giving conflicting decisions on similar issue involving
similar facts. This caused confusion amongst the taxpayers as well as the tax officials. In view
of this, in-principle approval of the Council was sought to replace the existing State specific
AARs with a centralized AAR having a national bench with different regional benches across
the country. A taxpayer having the same PAN registered in different States could approach the
regional bench of the centralized AAR where the head office of the taxpayer was located. He
informed that the Law Committee was not in favour of a centralized AAR but there was
agreement to create a centralised Appellate Authority for Advance Ruling (AAAR) having a
national bench with regional benches. The Hon’ble Minister from Kerala stated that the present
system of AAR should be allowed to stabilise and the same should be continued. The Hon’ble
Minister from West Bengal stated that centralization would create problems. He stated that both
the proposals, namely model 1 and model 2 in the Agenda would end up creating centralization
and would end up in creating problem for all the States. The Hon’ble Chairperson enquired as
to how a problem would be resolved when the same taxpayer registered in two different States,
was made to pay two different rates of tax on the same commodity on account of differing rulings
by the AARs of the two States. He added that in view of this, there should be a mechanism of an
appeal or a centralized authority because the issue would need to be resolved and, in its absence,
GST would not be one tax.
16.6. The Hon’ble Deputy Chief Minister of Bihar stated that as per the news reports being
published, AARs of different States were passing conflicting orders and there should be a
centralized AAR which should apply to the whole country. The Hon’ble Chairperson suggested
that normally when a State AAR gave a ruling, it should be binding with a right to appeal by the
Centre or the State or anyone else. However, when there was conflicting ruling by AAARs of
two or more States, there should be a right to appeal by Centre or State or anyone else to a
Centralised Appellate Authority of Advance Ruling (CAAR). The Hon’ble Minister from West
Bengal stated that there must be representation of the States in the Appellate body. The Hon’ble
Chairperson stated that to constitute the CAAAR, the necessary procedural changes in the GST
Laws should be prepared and recommended by the Law Committee and the same could be
brought in the next Finance Bill. He added that the corresponding draft should be prepared for
States also.
16.7. The Hon’ble Deputy Chief Minister of Gujarat stated that if two different rulings were
given by AAR of two States, a time-limit should be prescribed to decide the appeal. The Hon’ble
Chairperson stated that one should not have provisions to encourage further appeal. Appeal
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should only lie in cases of conflicting decisions of two or more AAARs. For hearing appeals in
such cases of conflicting decisions of AAARs of different States, the centralised Appellate
Authority for Advance Ruling (CAAAR) could have a part-time Chairman from the legal
background along with one officer from the Central Government and one from the State
Government having worked in the revenue department in the past. It should work only as a part-
time CAAAR.
16.8. The Hon’ble Minister from Tamil Nadu stated that the existing two-tier authority at the
State level would suffice and a move to create the centralized authority would tantamount to
depriving the States of their statutory rights and he was not in favour of such a mechanism. The
Hon’ble Chairperson stated that there would be finality of ruling of AAR at the State level and
this mechanism was only for conflicting decisions of AAARs for the same taxpayer registered in
different States. The Hon’ble Deputy Chief Minister of Gujarat stated that since HSN codes were
also given, there should be no reason for conflicting decisions. The Hon’ble Chairperson stated
that classification disputes in central excise were common. Summing up, the Secretary stated that
from the discussion it emerged that both AAR and AAAR would continue. However, where
there were conflicting decisions of two or more AAARs in relation to a taxable person registered
in two or more States (i.e. registered as distinct persons) on the same issue, an appeal would lie
to a separate body (CAAAR) which would consist of a Chairman with a legal background and
one officer from the Central Government and one officer from the State Government who had
worked in the revenue department in the past. The Council agreed to this proposal and gave in
principle approval with direction to the Law Committee to draft appropriate law changes in this
regard.
(ii) Agenda Item 7(xv): Suggestions on allowing quarterly payment of tax by small
taxpayers
16.9. The Commissioner (GST Policy Wing), CBIC stated that the Council had earlier agreed
to allow quarterly return filing for small taxpayers with monthly payment of tax. In view of the
various representations received regarding liquidity problem by small and medium businesses in
depositing monthly tax, particularly when payments were pending for a long period (especially
from Government departments). In this view, the matter was placed before the Council for
consideration whether taxpayers having turnover upto Rs.5 crore may be allowed to also pay tax
on quarterly basis and the buyers from such small taxpayers may be allowed to take input tax
credit at the time of purchase i.e. even before the tax was due to be paid by the supplier. The
Hon’ble Deputy Chief Minister of Bihar stated that the present provision of filing quarterly return
and making monthly payments existed during the VAT regime even for small taxpayers. He
observed that it was easier to deposit tax monthly and it should not be an issue for the taxpayers
to deposit the tax.
16.10. The Hon’ble Minister from Uttar Pradesh stated that agreeing to this proposal would
benefit the medium and small enterprises. The Hon’ble Minister from Karnataka stated that
already a very significant concession had been given to small taxpayers to file quarterly return
and now a mid-course correction would destabilise the system. He added that, since a new return
system was in pipeline, these taxpayers should continue to make monthly payments and multiple
changes in the system should be avoided. The Hon’ble Minister from Kerala stated that if input
tax credit was allowed without payment of tax, this could lead to loss of revenue as some
taxpayers could vanish. The Hon’ble Minister from West Bengal also suggested that tax payment
should be made on monthly basis. The Hon’ble Chairperson stated that since the Members
favoured monthly payment, the existing provisions could continue and the issue could be
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revisited, if required, when the new return filing system was in place. The Council agreed to this
suggestion.
(iii) Agenda Item 7(xvi): Circular to clarify taxability of medicines and consumables
supplied to in-patients in hospitals during the course of treatment
16.11. The Commissioner (GST Policy Wing), CBIC stated that doubts had been raised on the
issue of taxability on medicines and consumables like implants, stents, etc. supplied to in-patients
in the hospitals (which were exempted from GST) during the course of medical treatment. He
stated that Hospitals were charging patients on the basis of MRP which included GST but the
Hospitals were not paying GST to the Government nor they were claiming Input Tax Credit. In
view of this, it was proposed to clarify that supply of medicines etc., whether part of a package
deal or otherwise, shall be taxable under GST with proportionate input tax credit as this was not
a composite supply. Hospitals were categorised as retailers under the Drug Price Control Order
(DPCO) and Drugs and Cosmetics Act and hospitals were billing medicines and consumable at
MRP which meant that it was inclusive of taxes.
16.12. The Hon’ble Chairperson observed that if a hospital was charging medicines where tax
component was in-built, then it would be fair for them to pay tax. The Hon’ble Deputy Chief
Minister of Gujarat stated that it would increase the cost of treatment for patients. The Hon’ble
Minister from West Bengal stated that the health sector was a sensitive sector and hospitals
served thousands of patients in a day and one should examine the issue carefully. The Hon’ble
Chairperson suggested that instead of making the clarification hospital specific, the Law
Committee should further examine this issue and work on a formulation that wherever an
exempted service was supplied which involved supply of taxable goods to the service recipient,
the service provider shall be liable to pay tax on such goods.
16.13. Advisor (Financial Resources), Punjab stated that the issue involved in this case could
have impact on the entire structure of the GST. He stated that issue was as to what constituted
the composite supply and added that the composite supply is those supplies which are naturally
bundled and therefore the tax would have to be charged based on the principal supply such as a
hotel accommodation where breakfast was also provided within the same room rent. He added
that the hospitals could be billing in two ways i.e. either they gave a breakup of individual
consumables or medicines and charged separately for the health care services and the other like
a composite supply. He suggested that the issue should be considered afresh and requested to
drop this entire proposal pending further examination. The Hon’ble Chairperson suggested that
this could be further discussed in the Law Committee. The Council agreed to this suggestion.
(iv) Agenda Item No.7(xxi): Reduction in amount of late fee leviable on account of delayed
furnishing of FORM GSTR-1, FORM GSTR-3B & FORM GSTR-4 for the
months/quarters from July 2017 to September 2018
16.14. The Commissioner (GST Policy Wing), CBIC stated that two alternative proposals were
discussed by the officers during the meeting on 21st December 2018. The first alternative was
that the late fee may be completely waived off for FORM GSTR-1, FORM GSTR-3B and FORM
GSTR-4 for the months/quarters from July 2017 to September 2018 which will be furnished from
22nd December, 2018 but latest by 31st March 2019. However, no refund of late fee to be given
to those taxpayers who have already furnished such details/returns. The second alternative was
that the maximum amount of late fee payable may be reduced. In case of GSTR-1/GSTR-
3B/GSTR-4 for the months of July 2017 to September 2018 which will be furnished from 22nd
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December, 2018 but latest by 31st March 2019 in case of taxpayers with nil tax liability, to charge
a reduced late fee of Rs.500 + Rs.500 per return i.e. under CGST and SGST Acts instead of the
present limit of Rs.5,000 + Rs.5,000. For other taxpayers, the limit may be kept at Rs.1,000 +
Rs.1,000 per return. However, no refund of late fee may be given to those taxpayers who have
already furnished such details/returns. The Hon’ble Deputy Chief Minister of Bihar stated that
since it was a one-time waiver and a large number of returns were pending on account of small
taxpayers, it would be desirable to completely waive off the late fee. He added that there would
not be much revenue implication but this would improve compliance. He suggested that the
Council should agree to the first alternative. The Council agreed with this suggestion.
(v) Agenda Item 7(xxii): Proposal to extend benefit of composition levy for small service
providers
16.15. The Commissioner (GST Policy Wing), CBIC stated that presently composition scheme
was not available for service providers other than restaurant services. Following the CGST
(Amendment) Act, 2018 a composition taxpayer could supply services (except restaurant sector)
of value not exceeding 10% of its turnover in a State/Union Territory in the preceding financial
year or 5 lakh rupees, whichever is higher. He stated that it was proposed to seek in-principle
approval of the Council for extending the composition scheme to small service providers with
annual turnover upto Rs.50 lakh in the preceding financial year with a uniform tax rate at 5% of
the turnover in the State / Union Territory and no input tax credit to be allowed to them. He added
that the proposed changes would require amendment to the CGST and SGST Acts.
16.16. The Hon’ble Chairperson elaborating on the proposal stated that the small service
providers like electricians, plumbers, etc. were not professionals. They had to pay 18% tax and
as they did not have much of input tax credit, this tax incidence was passed on to the customers.
All this led to evasion of tax. He added that there were only 49,000 registrants as service providers
with annual turnover upto Rs.1 crore. He stated that professionals in the services sector were
completely becoming cash-centric and in order to get them into the tax system, it was desirable
to have a composition scheme on the lines available for the small traders. This composition
scheme could be limited to a smaller annual turnover of Rs.50 lakh and tax rate could be 5% or
12% given the fact that about 50% of the tax was normally paid through input tax credit. He
added that those in favour of taxing such composition taxpayers at the rate of 12% had, instead,
agreed to create a new rate of 9%. However, it would be better to continue with an existing rate,
say 5%.
16.17. The Hon’ble Minister from West Bengal observed that the proposed annual turnover of
Rs.50 lakh was very low. The Hon’ble Chairperson inquired whether the limit of annual turnover
should be increased to Rs.1 crore. The Hon’ble Minister from West Bengal stated that if the rate
of tax was lower, there would be greater chance of compliance. He also inquired that if the annual
turnover was kept at Rs.50 lakh, what would be the loss of revenue. The Hon’ble Chairperson
stated that the revenue loss would not be substantial. He stated that the State of Maharashtra had
done some study on this issue and invited Shri Rajiv Jalota, Commissioner, State Tax to give
details.
16.18. The Commissioner, State Tax, Maharashtra stated that in his State, there were about 2
lakh service providers with annual turnover upto Rs.50 lakh whose taxable turnover was
approximately Rs 32030 crore and total tax liability was Rs 5053 crore out of which the amount
paid through cash was Rs 3800 crore and payment through input tax credit was Rs.1368 crore.
He added that if the tax rate was made to be 5%, then the revenue earned would be around Rs
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3000 crore, out of which revenue in cash will be about Rs. 1700 crore. The Secretary stated that
the data of the Central Government was in relation to pure service providers and enquired
whether the data of 2 lakh service providers in Maharashtra also included those who made some
supply of goods.
16.19. Shri Prakash Kumar, CEO, GSTN stated that the data of Maharashtra was based on a
presumption, namely where more than 50% of the supply was made under chapter heading 99, it
was presumed that these were services supplier. When analysed in these terms, it was seen that
supplier of services were more than 2 lakh. The Hon’ble Minister from West Bengal stated that
there seemed to be some data inconsistency as the data from Maharashtra showed 2 lakh pure
service tax registrants with annual turnover upto Rs.50 lakh whereas Central data showed it to be
only 49,000. The Hon’ble Minister from Karnataka suggested that some more States should look
at their data before coming to any conclusion. The CEO, GSTN stated that they would try to
arrive at data for other States on the same basis as for Maharashtra. The Hon’ble Deputy Chief
Minister of Bihar stated that some States had been demanding for composition scheme for service
providers. He suggested to introduce a composition scheme for pure service providers with
annual turnover upto Rs.50 lakh with a tax rate of 5%.
16.20. The Hon’ble Minister from Tamil Nadu in his written speech stated that in respect of
the proposal to allow composition levy for small service providers, keeping in view the high
percentage of value addition for such taxpayers, he suggested that the Composition rate could be
high, say 15%.
16.21. The Hon’ble Minister from Uttarakhand in the written speech circulated during the
Council Meeting stated that in the interest of the petty contractors supplying to the Government,
it was suggested that they must be given a provision to opt for composition as has been given to
the restaurant services. This would make the procedure simpler. Earlier in the pre-GST regime
also, there was a composition scheme for contractors to pay in lump sum in lieu of tax. He urged
the Council to consider this provision.
16.22. The Hon’ble Minister from West Bengal stated that he was strongly in favour of a
composition scheme for small service providers but the data regarding the revenue from such
service providers was not clear and one should look at the numbers as to how many pure service
suppliers would be covered, if their annual turnover was taken as Rs.50 lakh and Rs.1 crore. He
stated that in-principle he agreed to have a composition scheme for small service providers. The
Hon’ble Chairperson stated that the Council could give in-principle approval to the proposal to
have a composition scheme for the small service providers but turnover threshold and the rate of
tax should be discussed by the Law Committee and the Fitment Committee and should be brought
before the next Council meeting. The Council agreed to this proposal.
(vi) Agenda Item 7(xxiv): Single interface for disbursal of refund amounts
16.23. The Joint Secretary, DoR made a presentation on this issue. He stated that currently
refund order for a taxpayer was being issued by a single authority for all four taxes but
disbursement of tax was taking place from two different sources. In some cases, taxpayers had
to follow up for release of the fund amount from two different administrations. He stated that it
was proposed that disbursement process should be automated and should happen from one source
i.e. integration of refund order system of the GSTN with PFMS (Public Financial Management
System) of the Central Government. He stated that initially disbursement could happen from the
Central Government cash account and the data could directly flow from GSTN to PFMS of the
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Central Government. The amount paid could be settled with the States on a monthly basis. He
added that this was already happening on a small scale for UIN (Unique Identification Number)
refunds. He stated that this process would make refund disbursement very smooth for the
taxpayers.
16.24. The Hon’ble Minister from West Bengal stated that if the disbursement was to be done
electronically, then there was no need to go to the Central account and there need not be any
intermediation by the Central authority. The Secretary explained that the refund sanction order
would continue to be given by the State which would be put in the system and then the refund
would be given through electronic mode. The Hon’ble Minster from West Bengal stated that no
centrality of role needs to be given to the Central Government. The Secretary stated that the
GSTN system would make the payment from the Consolidated Fund of India and adjustment
would be done later. The Hon’ble Minister from West Bengal observed that GSTN was already
overloaded and whether it was desirable to burden them further. The Secretary stated that
presently where tax refunds had been sanctioned, payments were getting delayed. Once refund
was sanctioned, payment was needed to be made quickly. He pointed out that in income-tax,
refund came to the taxpayer’s account through the electronic system. The Hon’ble Minister from
West Bengal stated that money should go to the taxpayer’s account digitally.
16.25. The CEO, GSTN explained that refund of exports by the Customs was totally automated.
Customs department checked the Shipping Bill and after its correctness was verified, the scroll
went to PFMS for refund. The same process would be carried out under GST. He added that the
refund sanction would be done by the respective tax authorities only. and the GST refund system
could be connected to PFMS. The processing of refund claim would be done by the officers and
then the payment advice would go through GSTN to PFMS. The Hon’ble Deputy Chief Minister
of Bihar stated that the proposed new system would be much better as the applicant would get
refund payment from one authority. He suggested that the Council may agree to it. The Hon’ble
Minister from West Bengal stated that in case of export refund, a physical paper was being dealt
with whereas it should be automatic and digital.
16.26. The Hon’ble Deputy Chief Minister of Gujarat stated that after sanction of refund, the
refund order went to the treasury and the money was released from the treasury. If the State had
no money in treasury and refund order was issued, then one needed to think how the situation
would be dealt with. The Joint Secretary, DoR stated that treasury control of payment was only
for payment of large sums of money and not for small individual payments. He added that for
exporters, the monthly refund would mostly be in the range of Rs.1 lakh to Rs.2 lakh and
normally treasury control was not exercised for such small amount. The Hon’ble Deputy Chief
Minister of Gujarat suggested to put a ceiling for refund amount so that for larger amounts of
refund, it could go with the approval of the treasury officer. He stated that Central Government
may also need to have such a check. The Hon’ble Chairperson observed that by automating the
system, the income-tax department was giving refund in weeks which earlier took years. The
Hon’ble Minister from West Bengal stated that if the entire process of refund was to be digital
then he would agree with the proposal. The Hon’ble Chairperson stated that the Central
administration was giving 96% of the refund claim whereas States were giving 85% to 87%. He
added that the Council should agree to start the new system on an experimental basis through a
pilot project. The Council agreed to this suggestion.
17. For Agenda Item 7, the Council approved the agenda as proposed for the Agenda items
7(i), 7(ii) 7(iii), 7(iv), 7(vi), 7(viii), 7(ix), 7(x), 7(xi), 7(xii), 7(xiii), 7(xvii), 7(xviii), 7(xix), 7(xx),
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7(xxiii), 7(xxv) and for other agenda items, the Council approved the proposals of the Law
Committee with the following amendments/directions:
17.1. For Agenda Item 7(v), the Law Committee to further examine the issue no. 2 upon
receipt of detailed proposal from the State of Punjab.
17.2. For Agenda item 7(vii), the Law Committee to re-examine the proposal to amend Rule
41 of GST Rules for apportionment of unutilised input tax credit between entities arising out of
the demerger of a company;
17.3. For Agenda item 7 (xiv), where there are conflicting decisions of two or more different
Appellate Authorities for Advance Ruling (AAAR) on the same issue in respect of a taxpayer
having the same Permanent Account Number (PAN) and registered in two or more States (i.e. as
distinct persons), an appeal shall lie to a separate part-time appellate body (CAAAR) consisting
of a Chairman with a legal background and one officer each from the Central and the State
Government who has worked in the revenue department in the past;
17.4. For Agenda item 7 (xv), there will be no quarterly payment of tax for taxpayers with
turnover upto Rs. 5 crore and, as approved earlier, they shall pay tax on monthly basis, and issue
could be revisited, if required, when the new return filing system was in place;
17.5. For Agenda item 7(xvi), the Law Committee to work on a formulation that wherever an
exempted service was supplied which involved transfer of taxable goods to the service recipient,
the service provider shall be liable to pay tax on such goods;
17.6. For Agenda item 7(xxi), to completely waive off the late fee for FORM GSTR-1,
FORM GSTR-3B and FORM GSTR-4 for the months/quarters from July 2017 to September
2018 allowed to be furnished from 22nd December, 2018 but latest by 31st March 2019, but no
refund of late fee to be given to those taxpayers who have already furnished such details/returns;
17.7. For Agenda items 7 (xxii), the Council agreed in-principle to have a composition
scheme for small service providers and the Law Committee and the Fitment Committee to
recommend the turnover threshold for Composition and the rate of tax to be applied on such
composition taxpayers and to bring it up in the next Council meeting;
17.8. For Agenda item 7(xxiv), the Council agreed to start the new system of single interface
for disbursal of refund amount on an experimental basis through a pilot project.
Agenda Item 8: Approval of modifications in Articles of Association (AOA) and
Memorandum of Association (MOA) of Goods and Services Tax Network (GSTN) based
on decision of the GST Council to convert it into a 100% Government-owned entity
18. Introducing this Agenda item, the Secretary informed that a corrigendum had been
issued in respect of this Agenda item in which, instead of the proposed allotment of 10 shares to
the GST Council remaining undistributed, after equal number of shares were allocated to all
States,, the State of Maharashtra had been proposed to be allotted these remaining shares being
on top among the States in GST collection and as proposed and approved by the Union Cabinet.
He stated that this Agenda item was discussed during the Officers meeting held on 21st December,
2018 and there was full agreement on the same and the Council could also agree to the same. The
Council agreed to the proposal made in under this Agenda item.
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19. For Agenda Item 8, the Council approved the shareholding pattern of Goods and
Services Tax Network (GSTN) contained in the revised Annexure 3 of the Agenda note circulated
in Volume-3 of the Agenda notes. The Council also approved, in principle, the Articles of
Association and the Memorandum of Association of GSTN and authorised GIC to go through
them in detail and finalise the same.
Agenda Item 9: Status report of work of GoM on Revenue Mobilisation
20. The Secretary informed the status of work done by the GoM on Revenue Mobilisation.
He stated that one meeting of the GoM was held on 18th October, 2018 during which it was
decided to get views of the States on certain issues. A questionnaire had been circulated by the
GST Council Secretariat to the States but views had been received only from the States of Gujarat
and Karnataka while views of the other States were awaited.
20.1. The Hon’ble Minister from Kerala enquired regarding the time frame by which the
report of the GoM would be finalised. The Hon’ble Deputy Chief Minister of Bihar, Convenor
of the GoM on Revenue Mobilisation, stated that they would hold another meeting during
January, 2019 and submit a report of the GoM during the next meeting of the Council.
20.2. On the proposal of the State of Kerala to levy additional 10% SGST in its own State for
flood relief, the Hon’ble Minister from Tamil Nadu in the written speech circulated during the
Council Meeting stated that he was, in principle, agreeable to the State-specific additional cess
on the SGST of the particular State for the purpose of creating additional resource for funding
for natural calamities and disasters through GST. He cautioned that such a cess or additional rate
of tax should not be for an indefinite period and should be levied within the respective State and
not be applicable on IGST payable on the goods when exported from that State. He added that
system changes should not adversely affect the functioning of GSTN IT system in other States
or cause compliance burden in other States.
20.3. The Hon’ble Minister from Uttarakhand in the written speech circulated during the
Council Meeting stated that views of Uttarakhand on the questionnaire circulated by the GST
Council Secretariat were part of the speech.
20.4. The Hon’ble Chairperson observed that there was already a high-level Committee
comprising of Home Minister, Agriculture Minister and himself which deals with budgetary
allocation to NDRF (National Disaster Response Fund). He stated that the GoM could consider
whether there should be a parallel track for budgetary allocation in the Council or whether it
should be subsumed in the NDRF. He added that the total outlay for the entire country for NDRF
was about Rs. 10, 000 crore and it needed to be considered how much resources could be
collected annually by additional levy on luxury items and what should be distribution mechanism
as calamity were of two types. The Hon’ble Deputy Chief Minister of Bihar stated that in the last
meeting of the GoM it was also discussed whether the State affected by calamity should only
impose the tax or should the entire country share the responsibility. The Hon’ble Chairperson
stated that if the State affected by calamity raised the tax, then consumers would suffer.
20.5. The Hon’ble Minister from Kerala stated that his State needed additional resources in
view of the calamity suffered and the NDRF and the SDRF (State Disaster Response Fund)
assistance was only for specific purpose. He added that if no consensus could be reached to
impose a national level calamity cess, then the State could be given flexibility to impose
additional cess for calamity. The money so raised could be used for relief work but this revenue
would not be sufficient to finance the reconstruction cost. Therefore, he proposed that a sub-
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committee of GoM could meet the Finance Commission and suggest that in assessing the
reconstruction cost required, additional FRBM borrowing limit upto 0.5% could be allowed for
two years. The Hon’ble Finance Minister stated that GoM should take note of the views of the
State of Kerala and prepare a report and bring a proposal in the Council in the next meeting. The
Council agreed to this suggestion.
21. For Agenda Item 9, the Council took note of the work done by the GoM on Revenue
Mobilisation and decided that its Report shall be placed before the Council in its next meeting.
Agenda Item 10: Status report of passage of SGST (Amendment) Bill, 2018 in various States
and Union Territories with Legislatures
22. Introducing this Agenda item, the Secretary informed that the Council, in its 28th
Meeting held on 21st July, 2018, had approved the proposal for amendments in the CGST Act,
2017, IGST Act, 2017, UTGST Act, 2017 and GST (Compensation to States) Act, 2017. While
the Central Government and majority of the States had passed the Amendment Acts, four States,
namely Delhi, Meghalaya, Puducherry and Telangana had not yet passed the SGST
(Amendment) Act. During the Officers meeting held on 21st December, 2018, it was informed
that the Legislative Assemblies of Puducherry and Delhi had also passed the Amendment Bills
on 18th and 21st December, 2018 respectively. The Amendment Bills were also expected to be
passed shortly by the States of Meghalaya and Telangana. In view of this, it was proposed to
notify the Amendment Acts on 1st February, 2019. The Council agreed to the proposal.
23. For Agenda Item 10, the Council took note of the status of the passage of the SGST
Amendment Bills, 2018 and decided that the amended CGST Act, IGST Act, GST
(Compensation to States) Act and SGST Acts shall be notified on 1st February, 2019.
Agenda Item 11: Reconstitution of membership of the Law Committee, Fitment Committee
and IT Committee for information of the Council
24. Introducing this Agenda item, the Secretary stated that the membership of the Law
Committee, Fitment Committee and IT Committee had been reconstituted on account of transfer
of some of the erstwhile Members of the Committees. The orders were placed before the Council
for information. The Council took note of the reconstitution of these three Committees.
25. For Agenda Item 11, the Council took note of the reconstituted membership of the
Law Committee, Fitment Committee and IT Committee.
Agenda Item 12: Any other agenda item with the permission of the Chairperson
Agenda Item 12(i): Notification to be issued to extend the due date for filing of returns in
FORM GST ITC-04 for the period July 2017 to December 2018
26. The Secretary informed that this Agenda item was discussed during the Officers
meeting held on 21st December, 2018 and there was agreement amongst the officers to extend
the due date for filing of return in FORM GST ITC-04 for the period July, 2017 to December,
2018 till 31st March, 2019 as development and implementation of the revised FORM GST ITC-
04 was expected to take some more time. He proposed that the Council could agree to the same.
The Council agreed to this proposal.
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27. For Agenda item 12(i), the Council approved to extend the due date for filing of return
in FORM GST ITC-04 for the period July, 2017 to December, 2018 till 31st March, 2019.

Agenda Item 12 (ii): Ad hoc Exemptions Order(s) issued under Section 25(2) of Customs
Act, 1962 to be placed before the GST Council for information
28. Introducing this Agenda item, the Secretary stated that an Ad hoc Exemption Order
No.02 of 2018 was issued on 11th December, 2018 on the request of the Ministry of Defence for
Customs Duty exemption for import and re-export of guns/equipment from Sri Lanka. This also
involved IGST exemption of about Rs.83.3 lakh. He stated that the Council may take note of the
Order. The Council took note of the Order.
29. For Agenda Item 12(ii), the Council took note of the Ad hoc Exemption Order (AEO)
No.02 of 2018 dated 11th December, 2018.
Agenda Item 12(iii): Proposals for boosting real estate sector under GST regime by
providing a composition scheme for residential construction units
30. The Secretary stated that in view of the difficulties faced by the real estate sector, it was
proposed that GST at the rate of 5% could be prescribed without input tax credit for construction
of residential complexes, buildings and civil structures for houses other than affordable housing
projects. For houses in affordable housing projects also, GST rate of 5% could be prescribed
without input tax credit. In the interest of revenue, certain safeguards were suggested, like 80%
of inputs, capital goods and input services other than TDR (transfer of development rights) or
similar rights shall be purchased from a GST registered supplier only and for purchases which
are below 80% benchmark and are procured from unregistered persons, GST at the rate of 12%
on reverse charge basis should be paid in cash by the registered person without any input tax
credit.
30.1. The Hon’ble Chairperson stated that this Agenda item on real estate sector was placed
before the Council in order to give boost to this sector. He stated that about 7 to 8 lakh apartments
were lying unsold, which had caused blockage of funds for the real estate developers. He
explained that if a purchaser invested in a flat under construction, he had to pay GST at the rate
of 12% and even though input tax credit was available, psychologically buyers found payment
of 12% GST burdensome. He observed that if input tax credit was passed on to the buyers, the
incidence of tax was not very high but the psychological factor was still there.
30.2. The Hon’ble Minister from Kerala stated that he needed time to study the proposal. The
Hon’ble Minister from Goa suggested that as people in the real estate sector were suffering, it
should be implemented early. The Hon’ble Chairperson observed that availability of input tax
credit encouraged every transaction in real estate by cheque payment and introduction of
composition scheme in the real estate sector had the risk of encouraging transactions in cash.
Because of this, there was a proposal for payment of tax on reverse charge basis if more than
20% of the total construction material was purchased from an unregistered taxpayer. He stated
that this suggestion was via media so that the tax could be reduced to 5% with no input tax credit
provided if 80% of the inputs are purchased through banking transactions from registered dealers,
otherwise the buyer would pay 5% and the builder would pay balance 7%. The Hon’ble Minister
from West Bengal stated it would become complicated and added that if no input tax credit was
permitted, then there would be more transactions in cash. The Hon’ble Minister from Kerala
stated that the Fitment Committee had not looked into the proposal and it should be examined by
the Committee. The Hon’ble Deputy Chief Minister of Gujarat stated that making housing
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available was the responsibility of every State Government and this proposal should be
implemented. The Hon’ble Chairperson suggested that this proposal could be examined jointly
by the Fitment Committee and the Law Committee. The Council agreed to this proposal.
31. For Agenda Item 12(iii), the Council approved that the proposal shall be examined
jointly by the Fitment Committee and the Law Committee and thereafter, their recommendations
shall be placed before the Council.
Agenda Item 12(iv): Proposal to increase the threshold exemption limit for supplier of
Goods (manufacturers and traders) under GST from existing turnover of Rs. 20 lakh to Rs.
75 lakh and from Rs. 10 lakh to Rs. 20 lakh for Special Category States in a year
32. Introducing this Agenda item, the Secretary stated that the present exemption limit for
taking registration under GST was annual turnover of Rs.20 lakh. However, this had caused
compliance burden for small taxpayers. He added that in the pre-GST days, small manufacturers
having annual turnover upto Rs. 1.5 crore were exempt from registration under Central Excise.
For the smaller manufacturers, return filing had become burdensome. In view of this, it was
proposed to increase the threshold exemption limit for suppliers of goods (manufacturers and
traders) from the existing annual turnover of Rs.20 lakh to Rs.75 lakh and from Rs.10 lakh to
Rs.20 lakh for ‘Special Category’ States.
32.1. The Hon’ble Chairperson stated that this was an important issue and this could be
considered in the GoM on MSME. The Council agreed to the same.
33. For Agenda Item 12(iv), the Council approved to refer this issue to the GoM on MSME
for consideration and making available their recommendations to the Council.
Agenda Item 12(v): Proposal for removal of differential rate of GST on lottery run by State
Government and lottery authorized by the State Government
34. Introducing this Agenda item, the Secretary stated that representations had been received
from All India Federation of Lottery Trade and Allied Industries that the present two rates of
GST on lottery, namely 28% on lotteries authorised by the State Governments and 12% on
lotteries run by the State Governments were creating different types of difficulties. It had led to
reduction in sales; it was anomalous to have two rates on the same product of lottery when sold
in the State itself and when sold in another State and a huge variation of 16% between two rates
helped the larger States and exploited customers of smaller States, who could not compete with
the former. High differential rates also encouraged non-compliance by small business. In view
of this, it was proposed to rationalise the rates by increasing the GST rate of 12% on lotteries run
by State Governments. The Hon’ble Chairperson enquired as to what was the experience of
maintaining two different rates on lottery. The Hon’ble Minister from Kerala suggested that
status quo should be maintained and stated that he would prefer to discuss the issue bilaterally
with the Hon’ble Minister from Maharashtra, Punjab and West Bengal regarding the problems.
He also added that legality of such rationale was unquestionable and this had been upheld by the
Hon’ble High Court too. The Secretary proposed that it could also be discussed in the Committee
of Officers. The Hon’ble Chairperson suggested that the issue could be discussed in the joint
meeting of Fitment Committee and the Law Committee. The Council agreed to this proposal.
35. For Agenda Item 12(v), the Council approved that the issue shall be discussed in the
joint meeting of the Fitment Committee and the Law Committee and their recommendations shall
be placed before the Council in its next meeting.
Other Issues
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36. The Hon’ble Ministers from Tamil Nadu and Uttarakhand circulated written speeches
during the Meeting of the Council. The extracts of the speech relating to the relevant Agenda
item have been recorded as part of discussion on those Agenda items. In addition to that, some
other important issues highlighted in the written speech are recorded herein below.
36.1. In the written speech of the Hon’ble Minister from Tamil Nadu, he suggested that
taxpayers, who could not claim transitional credit due to issues other than IT glitches, namely
clerical errors, entry of claim in the wrong table and so on, were filing writ petitions before the
High Courts and getting directions to consider their representations. To resolve this problem,
Tamil Nadu had proposed that the IT Grievance Redressal Committee itself could be mandated
to deal with such non-IT glitch cases also. The IT Grievance Redressal Committee had resolved
to bring a subject to the Council, but surprisingly this had not been done. He urged the Council
to resolve this matter. He expressed agreement with most of the recommendations of the Law
Committee, but on the proposal of single interface for disbursal of refund amounts, he stated that
GSTN must devise a glitch-free module for refund. The State would prefer that the existing
system of allowing claims of refund based on invoices which find place in FORM GSTR-2A
should continue. He also suggested that the Hon’ble Chairperson should look into the matter of
constituting the GST Appellate Tribunal at the earliest as there were several litigations pending,
challenging the qualifications prescribed for the members of the proposed GST Appellate
Tribunal.
36.2. In the written speech circulated by the Hon’ble Minister from Uttarakhand, it was
highlighted that the State of Uttarakhand is a landlocked Himalayan State and there was a special
Central Industrial package for the State, which gave area-based exemption in Central Excise.
During the period, a lot many industries were established in the region and there was a huge spurt
in growth of revenue in the State. The revenue accruing to the State due to CST was almost 29.5%
of the total revenue, which was no more the case (the national average was just 8%). In addition
to this, the drop in the rate of tax in GST, when compared to VAT, also impacted the revenue
and the contribution from service sector had been minimal. Thus, due to structural reasons, his
State had lost out on revenue, which was not recoverable by means of just enforcement action,
as it was not a case of tax evasion. Thus, Uttarakhand was in a disadvantageous position, which
was also noted by the Hon’ble Chairperson during the earlier Council meeting. In pursuance of
this, the former Finance Secretary had recently visited Uttarakhand to study the impact of GST.
In his report on the Revenue Gap Analysis, it was stated that Uttarakhand is among the top 5
States in terms of the percentage of revenue shortfall. Up to November, 2018, the average revenue
shortfall of Uttarakhand was 34% as against the national average of 10%. The Study observed
that due to structural factors connected to switchover, Uttarakhand had lost about 34.5% of its
revenue base (29.5% of CST and 5% of input tax credit reversal on stock transfer). The Hon’ble
Minister added that it was imperative that for States where the revenue base was reduced due to
structural factors, some remedy be given. He requested the Council to recommend to the Union
Government/Finance Commission and other bodies to keep this in mind and account for the loss
the State had suffered due to structural changes brought about by GST.
36.3. He further suggested that the revenue position of the State could be improved by
notifying sub-rule (7) of Rule 138 of the GST Rules, which provides for generation of e-Way bill
by the transporter where the aggregate value of the consignment carried in a conveyance is more
than Rs.50,000. This provision was presently kept in abeyance. In the absence of this provision,
transporters were taking multiple consignments of various dealers with each individual dealer’s
consignment being less than Rs.50,000, but in aggregate it was far more, thus circumventing the
spirit of law. He added that Uttarakhand has a very porous border near Hardwar / Bijnor /
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Muzaffarnagar / Saharanpur and also near Udhamsingh Nagar / Moradabad / Rampur / Bareilly.
He stated that to check evasion, the State had earlier a system of trip-sheets, which covered every
transaction/import irrespective of the value of goods. Now with no mandatory provision for
online declaration for importing goods, if the consignment is of multiple persons with individual
value less than Rs.50,000, the capacity of the enforcement unit is drastically reduced. He also
suggested that for goods, which are high in weight/quantity but low in cost, such as minor
minerals, river bed material, soap stone and bricks, the e-Way bill should be based on
weight/quantity rather than value.
Agenda Item 13: Date of the next meeting of the GST Council
37. The Hon’ble Chairperson stated that the date of the next meeting of the Council would
be informed at a later date once the issues referred to the GoM on MSME and the Fitment
Committee and the Law Committee were examined and their recommendations were ready.
38. The meeting ended with a vote of thanks to the Chair.

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Annexure 1
List of Ministers who attended the 31st GST Council Meeting on 22 December 2018
Sl
No State/Centre
Name of Hon'ble
Minister Charge
1 Govt of India Shri Arun Jaitley Union Finance Minister
2 Govt of India Shri S.P. Shukla Minister of State (Finance)
3 Andhra Pradesh
Shri Yanamala
Ramakrishnudu
Minister of Finance, Planning, CT
and Legislative Affairs
4 Assam
Dr Himanta Biswa
Sarma
Finance Minister
5 Bihar Shri Sushil Kumar Modi Deputy Chief Minister
6 Delhi Shri Manish Sisodia Deputy Chief Minister
7 Goa Shri Mauvin Godinho Minister for Panchayat
8 Gujarat Shri Nitinbhai Patel Deputy Chief Minister
9 Haryana Capt. Abhimanyu Excise & Taxation Minister
10 Jharkhand Shri C.P. Singh
Minister - Department of Urban
Development, Housing and Transport
11 Karnataka Shri Krishna Byregowda
Minister for Rural Development and
Panchayati Raj, Law and
Parliamentary Affairs
12 Kerala Dr. T M Thomas Isaac Finance Minister
13 Maharashtra Prof. Ram Shinde
Minister for Water Conservation &
Protocol
14 Manipur Shri Y Joykumar Singh Dy. Chief Minister
15 Odisha
Shri Shashi Bhusan
Behera
Finance Minister
16 Puducherry Shri V. Narayanasamy Chief Minister
17 Punjab
Shri Manpreet Singh
Badal
Finance Minister
18 Tamil Nadu Shri D. Jayakumar
Minister for Fisheries and Personnel
& Administrative Reforms
19 Tripura Shri Jishnu Dev Varma Deputy Chief Minister
20 Uttarakhand Shri Prakash Pant Finance Minister
21 Uttar Pradesh
Shri Rajesh Kumar
Agarwal
Finance Minister
22 West Bengal Dr. Amit Mitra Finance Minister
23
Jammu &
Kashmir*
Shri K K Sharma
Adviser to Hon’ble Governor (I/C
Finance)

*The representative from Jammu & Kashmir attended the Meeting on behalf of the Hon’ble
Governor of Jammu & Kashmir. The matter regarding exact status of the Advisor to the Governor
in the GST Council was under consideration in consultation with the Union Ministry of Law

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Annexure 2
Officials who attended 31st GST Council Meeting on 22 December 2018
Sl No State/Centre Name of the Officer Charge
1 Govt. of India Dr. A B Pandey Revenue Secretary
2 Govt. of India Shri S Ramesh Chairman, CBIC
3 Govt. of India Shri Mahender Singh Member (GST), CBIC
4 Govt. of India Shri P.K. Das Member (Cus), CBIC
5 Govt. of India Dr. John Joseph Member (Budget), CBIC
6 Govt. of India Dr. Rajeev Ranjan
Special Secretary, GST
Council
7 Govt. of India Shri J S Chawla Pr. CCA
8 Govt. of India Shri Manoj Sethi CCA
9 Govt. of India Shri P.K. Mohanty Advisor (GST), CBIC
10 Govt. of India Shri P.K. Jain Pr. DG, DG-Audit, CBIC
11 Govt. of India Shri G.D. Lohani Joint Secretary, TRU I, DoR
12 Govt. of India Shri Manish Kumar Sinha Joint Secretary, TRU II, DoR
13 Govt. of India Shri Ritvik Pandey Joint Secretary, DoR
14 Govt. of India Shri Upender Gupta Commissioner (GST), CBIC
15 Govt. of India Shri Yogendra Garg ADG, GST, CBIC
16 Govt. of India Shri S.K. Rahman ADG, GST, CBIC
17 Govt. of India Shri Venkat Reddy ADG, DG-GST
18 Govt. of India Shri D.S. Malik DG (M&C)
19 Govt. of India Shri Rajesh Malhotra ADG (M&C)
20 Govt. of India Shri Reyaz Ahmad Director, TRU I
21 Govt. of India Shri Parmod Kumar OSD, TRU-II, DoR
22 Govt. of India Shri Gaurav Singh Deputy Secretary, TRU-I, DoR
23 Govt. of India Shri Pramod Kumar
Deputy Secretary, TRU-II,
DoR
24 Govt. of India Shri N Gandhi Kumar Deputy Secretary, DoR
25 Govt. of India Ms Himani Bhayana
Joint Comm., GST Policy
Wing
26 Govt. of India Shri Amaresh Kumar
Joint Comm., GST Policy
Wing
27 Govt. of India Shri Rahil Gupta
Technical Officer, TRU-I,
DoR
28 Govt. of India Shri Shikhar Pant
Technical Officer, TRU-I,
DoR
29 Govt. of India Shri Nikhil Goyal
Technical Officer, TRU-I,
DoR
30 Govt. of India Shri Sushanta Mishra
Technical Officer, TRU-II,
DoR
31 Govt. of India Shri Harsh Singh
Technical Officer, TRU-II,
DoR
32 Govt. of India Shri Shashikant Mehta OSD, TRU-II, DoR
33 Govt. of India Shri Harish Y N OSD, TRU-II, DoR
34 Govt. of India Ms Nisha Gupta Dy. Comm., GST Policy Wing
35 Govt. of India Shri Vikash Kumar Dy. Comm., GST Policy Wing
36 Govt. of India Shri Asim Anand
Asst. Comm., GST Policy
Wing
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37 Govt. of India Shri Paras Sankhla OSD to Union Minister
38 Govt. of India Shri Nikhil Varma OSD to MoS (Finance)
39 Govt. of India Shri Mahesh Tiwari PS to MoS
40 Govt. of India Shri Debashis Chakraborty OSD to Finance Secretary
41 Govt. of India Shri Anurag Sehgal OSD to Chairman, CBIC
42 Govt. of India Shri Nagendra Goel Advisor, CBIC
43 GST Council Shri Shashank Priya Joint Secretary
44 GST Council Shri Dheeraj Rastogi Joint Secretary
45 GST Council Shri G.S. Sinha Director
46 GST Council Shri Jagmohan Director
47 GST Council Shri Arjun Meena Under Secretary
48 GST Council Shri Rakesh Agarwal Under Secretary
49 GST Council Shri Rahul Raja Under Secretary
50 GST Council Shri Mahesh Singarapu Under Secretary
51 GST Council Shri Mukesh Gaur Superintendent
52 GST Council Shri Rajeev Mirchia Superintendent
53 GST Council Shri Sandeep Bhutani Superintendent
54 GST Council Shri Vipul Sharma Superintendent
55 GST Council Shri Sarib Sahran Superintendent
56 GST Council Shri Amit Soni Superintendent
57 GST Council Shri Anis Alam Superintendent
58 GST Council Shri Dipendra Kumar Singh Superintendent
59 GST Council Shri Sunil Kumar Superintendent
60 GST Council Ms Sangeeta Dalal Inspector
61 GSTN Shri Prakash Kumar CEO
62 GSTN Ms Kajal Singh EVP (Services)
63 GSTN Shri Sarthak Saxena OSD to CEO
64 Govt. of India Shri C K Jain ADG, Audit
65 Govt. of India Shri V C Gupta ADG, Systems
66 Govt. of India Shri Kishori Lal
Commissioner, Chandigarh
Zone, CBIC
67 Govt of India Shri Pradeep Kumar Goel
Commissioner, Meerut Zone,
CBIC
68 Govt of India Shri Neerav Kumar Mallick
Commissioner, Bhopal Zone,
CBIC
69 Govt of India Shri Narayana Swamy
Commissioner, Bengaluru
Zone, CBIC
70 Govt. of India Shri R.C. Sankhla
Commissioner, Lucknow
Zone, CBIC
71 Govt. of India Shri S. Kannan
Commissioner, Chennai Zone,
CBIC
72 Govt. of India Shri Vijay Mohan Jain
Commissioner, Rohtak Zone,
CBIC
73 Govt. of India Shri Virender Choudhary
Commissioner, Vadodara
Zone, CBIC
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74 Govt. of India Shri P.K. Singh
Commissioner, Jaipur Zone,
CBIC
75 Govt. of India Shri Milind Gawai
Commissioner, Pune Zone,
CBIC
76 Govt. of India Shri B. Hareram
Chief Commissioner,
Vishakhapatnam Zone, CBIC
77 Govt. of India Shri Sanjay Mahendru
Commissioner, Mumbai Zone,
CBIC
78 Govt. of India Shri Nitin Anand
Commissioner, Ranchi Zone,
CBIC
79 Andhra Pradesh Dr D.Sambasiva Rao
Special Chief Secretary,
Revenue
80 Andhra Pradesh Shri J.Syamala Rao
Chief Commissioner, State
Tax
81 Andhra Pradesh Shri T Ramesh Babu Commissioner, State Tax
82 Arunachal Pradesh Shri Anirudh S Singh Commissioner (Tax & Excise)
83 Assam Shri Anurag Goel Commissioner, CT
84 Bihar Dr Pratima
Commissioner and Secretary,
CTD
85 Bihar Shri Arun Kumar Mishra Additional Secretary, CTD
86 Bihar Shri Ajitabh Mishra Dy. Commissioner, CTD
87 Chhattisgarh Smt Sangeetha P Commissioner, CT
88 Delhi Shri H. Rajesh Prasad Commissioner, State Tax
89 Delhi Shri Rajesh Goel
Additional Commissioner,
State Tax
90 Delhi Shri LS Yadav Asst. Commissioner, State Tax
91 Goa Shri Dipak Bandekar Commissioner, CT
92 Gujarat Shri Arvind Agarwal
Addl. Chief Secretary, Finance
Dept.
93 Gujarat Dr. P.D. Vaghela
Chief Commissioner of State
Tax
94 Gujarat Shri Ajay Kumar Special Commissioner
95 Gujarat Shri Riddhesh Raval Dy. Commissioner
96 Haryana Shri Sanjeev Kaushal
Addl. Chief Secretary, E & T
Dept
97 Himachal Pradesh Shri Jagdish Chander Sharma Principal Secretary (E&T)
98 Himachal Pradesh Shri Rajeev Sharma
Commissioner of State Tax
and Excise
99 Himachal Pradesh Shri Rakesh Sharma
Joint Comm., State Tax &
Excise
100 Jammu & Kashmir Shri Navin K. Choudhary Pr. Secretary, Finance Dept.
101 Jammu & Kashmir Shri P K Bhatt Commissioner, CT
102 Jharkhand Shri Prashant Kumar Secretary & CCT
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103 Jharkhand Shri Ajay Kumar Sinha
Addl. Commissioner of State
Taxes
104 Jharkhand Shri Brajesh Kumar State Tax officer
105 Karnataka Shri Srikar M.S. Commissioner, CT
106 Kerala Dr. Rajan Khobragade Pr. Secretary
107 Kerala Smt Tinku Biswal CCT
108 Madhya Pradesh Shri Pawan Kumar Sharma Commissioner, CT
109 Madhya Pradesh Shri Sudip Gupta Jt. Commissioner, CT
110 Madhya Pradesh Shri Manoj Kumar Choube Dy. Comm, CT
111 Maharashtra Shri Rajiv Jalota Commissioner, State Tax
112 Maharashtra Shri Dhananjay Akhade Jt. Commissioner, State Tax
113 Manipur Shri R. K Khurkishore Singh Jt. Commissioner, State Tax
114 Mizoram Shri H. K. Lalhawngliana Jt. Commissioner, State Tax
115 Odisha Shri A. K. K. Meena Principal Secretary, Finance
116 Odisha Shri Saswat Mishra Commissioner, CT
117 Odisha Shri Sahadev Sahoo Addl. Commissioner, CT
118 Puducherry Shri Dr. V. Candavelou Secretary to Govt. (Finance)
119 Puducherry Shri K Shridhar Dy Commissioner (ST)
120 Punjab Shri M. P Singh
Addl. Chief Secretary-cum-
Financial Commissioner
(Taxation)
121 Punjab Shri V. K. Garg
Advisor (Financial Resources)
to CM
122 Punjab Shri Vivek Pratap Singh
Excise & Taxation
Commissioner
123 Rajasthan Shri Niranjan Arya Pr. Secretary, Finance
124 Rajasthan Dr. Prithviraj Secretary Finance (Revenue)
125 Rajasthan Shri Alok Gupta Commissioner, State Tax
126 Rajasthan Shri Ketan Sharma
Addl. Commissioner, GST,
State Tax Dept
127 Sikkim Ms Dipa Basnet Commissioner, CT
128 Tamil Nadu Shri Ka. Balachandran
Prl Secretary, CT &
Registration
129 Tamil Nadu Dr. T.V Somanathan ACS/CCT
130 Tamil Nadu Shri Gnanasekaran
Addl. Commissioner
(Taxation)
131 Telangana Shri Somesh Kumar Pr. Secretary (Finance)
132 Telangana Shri Anil Kumar Commissioner of State Tax
133 Telangana Shri Laxminarayan Jannu
Addl. Commissioner, State
Tax
134 Tripura Shri Sudip Bhowmik Dy Commissioner, State Tax
135 Tripura Shri Badal Baidya Superintendent of State Tax
136 Uttar Pradesh Shri Alok Sinha ACS, CT
137 Uttar Pradesh Shri Vivek Kumar Addl. Commissioner, CT
138 Uttar Pradesh Shri C. P. Mishra Joint Secretary, CT
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139 Uttarakhand Ms. Sowjanya Commissioner, State Tax
140 Uttarakhand Shri Piyush Kumar Addl. Commissioner State Tax
141 Uttarakhand Shri Rakesh Verma Jt. Comm., State Tax
142 West Bengal Ms. Smaraki Mahapatra Commissioner, CT
143 West Bengal Shri Khalid A Anwar
Senior Joint Commissioner,
CT


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Annexure 3


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Annexure 4


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Agenda Item 2: Deemed ratification by the GST Council of Notifications, Circulars and
Orders issued by the Central Government
In the 22nd meeting of the GST Council held at New Delhi on 06th October, 2017, it was
decided that the Notifications, Circulars and Orders which are being issued by the Central
Government with the approval of the competent authority shall be forwarded to the GST Council
Secretariat, through email, for information and deemed ratification by the GST Council.
Accordingly, in the 31st meeting held on 22nd December, 2018, the GST Council had ratified all
the Notifications, Circulars, and Orders issued before the said date.
2. In this respect, the following Notifications, Circulars and Orders issued after 22nd
December, 2018 (date of the 31st GST Council Meeting), till 2nd January, 2019, under the GST
laws by the Central Government, as available on www.cbic.gov.in, are placed before the Council
for information and ratification: -
Act/Rules Type
Notification/Circular/Order
Nos.
CGST Act/CGST Rules
Central Tax 67 to 78 of 2018
Central Tax (Rate) 24 to 30 of 2018
IGST Act
Integrated Tax 4 of 2018
Integrated Tax (Rate) 25 to 31 of 2018
UTGST Act Union territory tax (Rate) 24 to 30 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
3. The GST Council may grant deemed ratification to the Notifications, Circulars and
Orders listed above.


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Agenda Item 3: Decisions of the GST Implementation Committee (GIC) for information of
the GST Council
GST Implementation Committee (GIC) took one decision between 22nd December 2018
(when the 31st GST Council Meeting was held) and 02nd January 2019 (before the 32nd GST
Council Meeting scheduled on 10th January 2019). Due to the urgency involved, this decision
was taken after obtaining approval by circulation amongst the GIC Members. The details of the
decisions taken is given below:
Decisions by Circulation – 27th December 2018
2. A proposal for approval of the GIC was received from Commissioner, GST Policy Wing,
CBIC regarding settlement of an additional IGST amount of Rs. 18, 000 crore on ad hoc basis.
2.1. It was mentioned that the agenda note had been received from the Department of
Revenue for approval of the GIC. It was stated that depending on the amount of IGST remaining
unapportioned, provisional settlement was being done from time to time on an ad hoc basis.
Accordingly, Rs. 35,000 crore was apportioned in February, 2018, Rs. 50,000 crore was
apportioned in June, 2018, Rs.12,000 crore was apportioned in August, 2018 and Rs. 30,000
crore was apportioned in October, 2018. These amounts were settled in a ratio of 50:50 to the
Centre and the States and the amount apportioned to States was divided in the ratio of subsumed/
protected revenue.
2.2. Further, based on the collection of IGST during the year, net of refunds and the settlement
of IGST during the period, both regular and provisional, it was proposed to do provisional
settlement of another Rs.18,000 crore, 50% to the Centre and 50% to the States. It was added
that this would reduce the revenue gap of States and therefore, the compensation required.
2.3. The GIC agreed to the proposal to settle an additional IGST amount of Rs. 18, 000 crore,
50% to the Centre and 50% to the States, on ad hoc basis. Accordingly, the implementing Order.
No. F.No. S-34011/21/2018-ST-I DoR dated 28th December 2018 was issued.
3. The decision of the GIC is placed for information of the Council.

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Agenda Item 5: Issues recommended by the Fitment Committee for the consideration of
the GST Council
Agenda Item 5(i): Proposals for boosting real estate sector under GST regime by providing
a composition scheme for residential construction units
I. Background
CREDAI has requested that GST on construction of residential complex, building, and
civil structure may be fixed at the composite rate of 5% without input tax credit. Similarly, GST
on affordable housing projects may be completely exempted. The advantages it would offer
consist of continuity with service tax regime which followed a composition system with the
service tax being levied at 4.5%. Secondly, the composite rate of 5% would reduce the adverse
impact on the land abatement of 33% being offered under the present system. Thirdly, such a
composite rate would be transparent, objective and non-discretionary and enhance ease of doing
business. Fourthly, the industry would be freed from the requirement of monthly returns for
availing input tax credit which are unduly cumbersome. Fifthly, the composite rate of 5% would
correct the imbalance under the present GST regime which subjects under construction projects
but leaves completed units out of its scope. Lastly, the overall impact of the reduction is likely to
be revenue positive with enhanced output. CREDAI has alternatively requested for rate
reductions with input tax credit. Ministry of Housing and Urban Affairs has also written
supporting the first proposal of CREDAI to charge GST @ 5% without ITC. On affordable
housing, they have suggested exemption or tax rate lower than 5%.
2. Similarly, Maharashtra Real Estate Regulatory Authority has stated that there is a
perception among owners of property that the transition from service tax to GST regime has
resulted in much higher outgoings for consumers and the Govt. is the beneficiary of that. This
perception can be corrected if the Govt. brings in a flat rate of GST of say 12% for all types of
real estate projects, with land abatement of 50% (2/3rd for affordable housing projects) and no
ITC. This would mean an effective rate of 6% (4 % for affordable housing projects) which will
be comparable to that of the service tax+ VAT rate of 5.5%. Such a move would not only give
the necessary fillip to affordable housing projects but also help in bringing down the high level
of unsold inventory of under construction projects, generate necessary liquidity in such under
construction projects and help expedite completion.
3. Another issue which is constantly raised by the builder is that 1/3rd abatement towards
value of land is not proper. The property prices are directly linked with land, i.e. location of
property, so property prices vary from city to city or location to location depending upon the
location of the property. Therefore, builders have demanded to prescribe higher percentages of
land abatement in metro cities. Further, many representations have been received from stake
holders complaining that builders are not passing concessional GST benefit of 8% for CLSS
(Credit Linked Supply Scheme) housing in the absence of any authenticated document. CLSS
component is one of the major limb of Pradhan Mantri Awas Yojana (Housing for all). Because
of non-passing of reduced tax benefit to beneficiaries, the purpose of tax concession gets
defeated.
4. From the above representations is appears that representatives of industry have suggested
following measures may be taken by ministry to boost the real estate sector. The suggestions are
as under:
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i. to levy 5% or similar lower rate of GST on sales of both under construction and ready to
move in flats with no input tax credit.
ii. to exempt transfer of development rights (TDR) and development rights in a Joint
Development Agreement from GST.
iii. to rationalize the deemed deduction of 1/3rd of the consideration towards value of land.
5. In pre-GST regime, two options were available with service providers for assessment
and payment of Service Tax on construction of a complex, building, civil structure and parts
thereof as under:
Option for
assessment and
payment of Tax
Value of construction service
for payment of Tax
Effective rate of tax Conditions
Composition
Scheme
30% of value –Rule 2A of the
Service Tax (Determination of
value) Rules, 2006.

The same abatement in value of
service was also available vide
Sr. No. 10 of notification No.
26/2012-ST.
4.5% of the Total
Amount charged
from buyer for the
flat/house
[0.3*ST@15%=0.45]
1. Value of land
included
2. ITC of capital
goods and input
services was
available. Credit
of duties or cess
paid on any
inputs, used in or
in relation to the
said works
contract was not
available.
Deduction of
actual value of
land and goods
Total amount charged from
buyer for the flat/house minus
actual value of land and goods.
15% on value of
service _
5.1. Apart from Service Tax of 4.5%, State VAT, in the range of 1% (Delhi, Gurgaon,
Mumbai, Chennai) to 5% (Bangalore) under composition scheme, was also payable. Different
states had different methodologies and options for payment of VAT. For example, in Maharashtra
and Uttar Pradesh following options were available for payment of VAT:
State Options for VAT payment Rate Conditions
Maharashtra Composition Scheme 8% Set off of upto 64% of the eligible
credit on purchase of inputs was
allowed.
Composition scheme for
notified contracts
5% Set off of upto 4% of eligible credit on
purchase of inputs was allowed
Composition scheme for
Builder and Developers
1% No set-off of taxes on inputs was
allowed.
Uttar Pradesh Composition Scheme 1% Where inputs in the works contract
have been procured from within the
State.
3% Where import inputs in the works
contract have been used besides goods
procured from within the State.
5.2. Considering pre-GST incidence of Service Tax and VAT, the effective combined tax in
pre-GST regime was in the range of 5.5% to 9.5% of value of flat plus embedded taxes.
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6. At present, construction of houses under the following schemes attracts concessional rate
of GST of 12% (effective rate of 8% after deduction of 1/3rd value of land)-
i. Following components of Pradhan Mantri Awas Yojana(PMAY):
a. the “ln-situ redevelopment of existing slums using land as a resource.
b. the “Beneficiary led individual house construction / enhancement”.
c. low cost houses up to a carpet area of 60 square metres per house in a housing
project approved by the competent authority under- (1) the “Affordable Housing
in Partnership” component of the Housing for All (Urban) Mission/Pradhan
Mantri Awas Yojana; (2) any housing scheme of a State Government.
d. the “Economically Weaker Section (EWS) houses” constructed under the
Affordable Housing in partnership by State or Union territory or local authority
or urban development authority). EWS house has been defined in the PMAY
scheme guidelines as a house having carpet area of 30 square metres.
e. the “houses constructed or acquired under the Credit Linked Subsidy Scheme for
Economically Weaker Section (EWS)/ Lower Income Group (LIG)/ Middle
Income Group-1 (MlG-1)/ Middle Income Group-2 (MlG-2)”
EWS: 30 sqm
LIG: 60 sqm
MIG I: 160 sqm
MIG II: 200 sqm
ii. low-cost houses up to a carpet area of 60 square metres per house in an affordable
housing project which has been given infrastructure status vide notification of
Government of India, in Ministry of Finance, Department of Economic Affairs vide
F. No. 13/6/2009-INF, dated the 30th March, 2017.
iii. single residential unit otherwise than as a part of a residential complex.
iv. a residential complex predominantly meant for self-use or the use of their employees
or other persons specified in paragraph 3 of the Schedule III of the Central Goods
and Services Tax Act, 2017.

Erstwhile schemes:
v. a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas
Yojana.
vi. low-cost houses up to a carpet area of 60 square metres per house in a housing project
approved by competent authority empowered under the 'Scheme of Affordable
Housing in Partnership' framed by the Ministry of Housing and Urban Poverty
Alleviation, Government of India (subsumed under PMAY, but projects started
under the scheme may be continuing).
II. Discussion
7. The Reserve Bank of India has issued a guideline for priority sector lending. Loans to
individuals up to ₹3.5 million in metropolitan centres (with population of ten lakh and above)
and loans up to ₹2.5 million in other centres for purchase/construction of a dwelling unit per
family provided the overall cost of the dwelling unit in the metropolitan centre and at other
centres does not exceed ₹4.5 million and ₹3 million, respectively. The loans sanctioned by banks
for housing projects exclusively for the purpose of construction of houses for Economically
Weaker Sections (EWS) and Low Income Groups (LIG), the total cost of which does not exceed
₹1 million per dwelling unit. For the purpose of identifying the economically weaker sections
and low-income groups, the family income limit is revised to ₹0.3 million per annum for EWS
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and ₹0.6 million per annum for LIG, in alignment with the income criteria specified under the
Pradhan Mantri Awas Yojana.
8. The effective combined pre-GST incidence of Service Tax and VAT on construction of
houses was in the range of 5.5% to 9.5% of value of flat plus embedded taxes. Thus, GST rate
of 5% without ITC on construction of houses will lead to collection of the same amount of
tax as earlier and will also ease compliance burden on this sector. Therefore, we may
consider prescribing GST rate of 5% without ITC on construction of houses. To ensure
that benefit of lower rate is passed on to the buyers, the proposed rate structure may be
made compulsory with no option to pay GST at effective rate of 12% or 8% with ITC.
9. We may consider prescribing concessional GST rate of 3% without ITC for affordable
housing. The concessional GST rate structure on affordable housing may be aligned with the
priority sector lending norms of RBI.
10. Some of the issues/challenges that may arise in implementation of the above rate
structure are as discussed below:
i. Construction is an evasion prone sector. Reducing tax to 5% without ITC may also lead
to revenue loss on supply of inputs such as steel, cement, sanitary items, paint, varnish
etc. used by the construction industry as it may start procuring such inputs without bills
and without properly accounting for the same in their books of account. Therefore,
condition need to be made that inputs, capital goods and input services other than
TDR/JDR not less than 80% shall be purchased from GST registered supplier only. It
will help to maintain the integrity of the supply chain.
ii. Proposal to charge 5% without ITC may lead to blockage of ITC and will be against the
spirit of GST. Since GST on inputs is a cost for the supply, later request to lower GST
on inputs may be received from trade. Therefore, in communication it shall be made clear
that input tax reduction would not be considered as the rate of 5% has been arrived taking
standard GST of 18% on inputs.
iii. All credits relating to inputs, input services and capital goods shall lapse on pro rata basis
to the extent used in construction of flats. Transition would also be based on this principle
and such inputs which are meant to be used for construction of flats shall also undergo
reversal of ITC.
iv. No request for refund shall be entertained in relation to any input tax credit which is
accumulated and proposed to be lapsed. This shall be made clear to the industry from the
beginning only.
v. The concessional rates based on cost of flats/houses may lead to some under valuation
of property. Buyers will tend to pay the cost in cash and manipulate the price ceiling so
as to enjoy the benefit GST rate of 3% without ITC. However, this may be addressed by
audit and enforcement.
vi. Teething problems would be addressed by seeking representation from the trade
proactively. Transition of input tax credit is expected to be the major area where there
would be transition problems which would be addressed. The proposal is not likely to
lead to any revenue loss as, at present, tax payments in cash are getting reported at rates
less than 5% of the gross value of the project.
III. Proposal before the Joint Law and Fitment Committee meeting held on 04.01.2019
11. Proposal before the Joint Committee was: -
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i. GST rate of 5% without ITC may be prescribed for construction of all houses including
the affordable housing under various schemes.
Alternatively,
ii. With a view to align the GST rate structure on construction of houses with Priority Sector
Lending guidelines of RBI for housing loans, we may prescribe GST on construction of
houses as under,
Sl.
No.
Description of service Tax rate
1 Construction of houses/ flats in a residential
complex where gross amount charged from a
buyer for the house, excluding stamp duty, in
metropolitan centres (with population of ten
lakh and above) is up to Rs. 45 lakh and at other
centres upto Rs. 30 lakh;
3% without ITC. (Effective rate
after 1/3rd deduction towards value
of land)
2 Treatment of existing projects:
Existing projects under various schemes of
Government at present attracting GST @ 8%,
where the agreement to sale has been signed
before 1st February, 2019;
3% without ITC. (Effective rate
after 1/3rd deduction towards value
of land), prospectively
3 Construction of houses/ flats in a residential
complex other than (1) and (2) above.
5% without ITC (Effective rate
after 1/3rd deduction towards value
of land)
12. To ensure that benefit of lower rate is passed on to the buyers, the proposed rate structure
may be made compulsory with no option to pay GST at effective rate of 12% or 8% with ITC
irrespective of whether proposal at 11 (i) or 11 (ii) is recommended.
IV. Safeguards
13. Further following safeguards/conditions may be prescribed to address the concerns of
revenue: -
a) Inputs, Capital goods and Input services not less than 80% other than TDR (or similar
rights) shall be purchased from a GST registered supplier only, to maintain the integrity
of the supply chain.
b) ITC treatment shall be such that supply of goods/services used for construction of
residential accommodation shall be treated as supplied for exempted supplies and
therefore reversed.
c) Accounting of purchases and whether the purchases constitute 80% from registered
persons shall be carried out financial year wise.
d) On such purchases which are below 80% benchmark and are procured from unregistered
persons, GST at the applicable rates on RCM basis shall be paid in cash by the trade
without any input tax credit. This would require that the amended law be brought into
force before this scheme is operationalized, as section 9(4) stands suspended as of now
and amended Section 9(3) would need to be used to impose tax under RCM.
e) Credits in the ledger which is relatable to material or services in store or work in progress
or consumed in construction of residential flats shall be required to be reversed (lapsed)
within 60 days of the launch of the scheme. This may be allowed on self-assessment
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basis with certification by Chartered Accountant where the amount is greater than the
threshold.

V. Proposal on transfer of development of rights (TDR) and development rights in a
Joint Development Agreement
14. Representatives have stated that TDR is equivalent to land sale, so no GST should be
applicable. GST should not be leviable on a right to use of a development right in the context of
a Joint Development Agreement also. It is like sale of land particularly when cost is included in
the tax on sale.
15. In so far as this contention is concerned, it is stated that Joint Development rights or
transfer of development rights in joint development agreement cannot be equated to outright sale
of land as same does not amount to transfer of land as contemplated under Section 53A of the
Transfer of Property Act. This position is as per various pronouncements of the Hon’ble Courts.
16. Further, transfer of development right is a service by the land owner to the developer/
builder of the property who in turn is engaged in the taxable supply of construction service. The
GST paid on such transfer of development rights is available as ITC to off-set the final GST
liability on the construction service. However, in the alternate scheme of composition of 5% GST
proposed, tax on these rights will stick as cost for the project. In order to provide boost to the
construction sector, we may exempt GST on TDR on construction of residential property only.
It will also address the cash flow issue. This exemption may not be granted for sale of residential
property which has been booked for sale after completion certificate has been issued. In this
regard, builder would be required to pay the GST leviable on such development rights thus
effectively reversing the exemption availed on TDR/ JDR used for such property at the time of
issue of completion certificate. To some extent, this would lead to addressing the problem of the
perception of differential GST on under construction and completed flats. This will be explicitly
communicated through media if needed.
17. Proposal on TDR before the Joint Law and Fitment Committee meeting held on
04.01.2019:
i. TDR/ development rights in JDA to the extent used for construction of residential
property except where entire consideration is received after issuance of completion
certificate may be exempted.
ii. Properties which were not booked before completion for sale and for which completion
certificate has been issued, exemption from GST on TDR/ development rights in JDA
shall be withdrawn. Hence, builder would be required to pay the GST on TDR to the
extent of TDR is used for these property at the time of issue of completion certificate.
This would address the problem of cash flow in relation to taxes on TDR/JDR.
iii. GST on TDR/ development rights in JDA for properties other than residential purpose
may continue to be taxed as usual.
iv. Time of supply of TDR/JDR for residential property may be shifted to point of issue of
completion certificate. This would lead to extinguishing of interest liability on
TDR/development rights in JDA.
18. Recommendation of the Joint Law and Fitment Committee meeting on 04.01.19
18.1. The issue was discussed in detail along with data analysis presented by various States.
The Committee noted following advantages of the proposal:
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a) It provides better perception (optics) of the rate of taxation on real estate;
b) It simplifies the tax structure for residential houses, particularly from the consumers’
perspective;
c) It addresses the concern of buyers that builders are not passing the benefit of ITC to the
customers;
d) It will give a fillip to purchase of flats as the buyers at present are dissuaded by the
headline rate of GST.
18.2. However, the following concerns were expressed in the Committee:
a) It will lead to price rise of residential sector, particularly in the lower cost segment, in
view of the fact that the present tax payment in cash is less than 5% of the gross value
while in the very high-end segment there may be a reduction in prices;
b) The control on input side by introducing the clause of minimum of 80% purchase from
registered taxpayers is not as strong as maintaining the integrity of credit flow;
c) To bring real estate into GST will require a journey in exactly the opposite direction;
d) Compliance of composite projects (residential plus commercial) would become difficult.
19. In view of the above, the Joint Committee recommended that the matter be decided in
the Council.

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Agenda Item 5(ii): Proposal regarding rationalisation of GST rates on Lottery
Proposal Comments
Request to remove
differential rate of GST on
lottery i.e. between lottery
run by state government
and lottery authorized by
the state government

Reference: All India
Federation of Lottery
Trade & Allied Industries

Recommendation of Joint Law and Fitment Committee
meeting on 04.01.19:
As the matter pertains to only a few States, many of whom
(NE States) are not members of this Committee, and the fact
that rate for this item was decided by the Council, the Joint
Committee felt that this matter may be discussed in the
Officers’ meeting.

Proposal before the Joint Law and Fitment Committee
meeting held on 04.01.2019:
Differential levy of GST of 28% on lottery authorized by State
Government and 12% on lottery run by State Government may
be rationalised by increasing GST of 12% on lottery run by
State Government. If the rate is increased to 28% from 12%
revenue gain would be approximately Rs. 1250 Cr.
Discussion:
At present two different rates of GST are being levied on lottery
as follows: -
1) GST@28% on Lottery authorized by State
Governments
2) GST@12% on Lottery run by State governments.

2. Representations on this rate structure have been received from
few States and trade for removing differential levy of GST on
two categories of lotteries. At present litigations are also pending
before various courts on this issue. The request for removing this
differential treatment has been represented by trade on account
of the following: -
i. There is only one type of State lottery i.e. the one which
conforms to the provisions of the section 4 of the
Lotteries Regulations Act, 1998. Discrimination in GST
rates is leading to reduction of sales especially in major
states of Maharashtra and Punjab.

ii. It is beyond comprehension as to how two different rates
of GST can be fixed on same product when sold in the
state itself and when sold in the other states, which is
against the provisions of the Competitions Act, 2012.
Discrimination does not exist in any other category of
products.

iii. The huge variation of 16% between two rates help the
larger states to exploit customers fully as smaller states
cannot compete with them. High differential rates
encourage non-compliance by small business.
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Proposal Comments
3. Calcutta High Court in judgement dated 10.10.2018 in the
case of Teesta Distributor vs UoI has upheld the present rate
structure. Even then, the product being a sin / de-merit good,
needs to be taxed at rates higher than 12%. The high differential
in tax also leads to malpractice of attempting to avail tax rate of
12% by mis-representation.
Agenda Item 5(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)
Proposal Comments
Request by CAPSI
to bring the entire
security services
sector including
body corporate
under RCM

Justification:
Private Security
Industry plays
important role in
creating employment
and maintaining law
and order.

Delayed payments
from clients which is
forcing security
industry to pay GST
before the actual
payment receipt.

Reference: 1) CAPSI,
2)CCT, Gujarat
Recommendation of Joint Law and Fitment Committee meeting
on 04.01.19:

TRU recommendation accepted.

Proposal before the Joint Law and Fitment Committee meeting
held on 04.01.2019:

TRU recommended that the proposal may not be accepted as body
corporate supplies are not put under RCM on grounds of compliance
difficulty or cash flow problems. Similar problem can be cited by
many industries.
Discussion:

As per the Sl. No. 14 of Notification No 29/2018 dated 31.12.2018 i.e.
Security services (supply of security personnel) provided by any
person other than a body corporate to a registered person, except
Government Departments which have taken registration for TDS and
entities registered under composition scheme, has been put under
RCM

2. Now the request is to incorporate supplies of security services body
corporate to body corporate may be placed under RCM.

3. Background:

3.1 Reverse charge on security services did not cover body corporates
in Service Tax era because purpose of reverse charge is to increase tax
compliance from smaller/unorganised service providers and to
increase tax revenue. As per Sl. No. 8 of Notification No. 30/2012-
Service Tax dated 20.06.2012, security services by any individual,
Hindu Undivided Family or partnership firm, whether registered or
not, including association of persons, located in the taxable territory
to a business entity registered as body corporate, located in the taxable
territory was under reverse charge mechanism.

3.2 On lines of Service Tax provisions, TRU recommended to
Fitment Committee on 14.12.2018 as below: -
Supply of Manpower for any purpose or Security services, by any
individual, Hindu Undivided Family or partnership firm, whether
registered or not, including association of persons, located in the
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Proposal Comments
taxable territory to a business entity registered as a body corporate
located in the taxable territory may be levied GST under reverse
charge mechanism (RCM)

3.3 As per the Fitment Committee decision, Agenda of GST
Council Meeting read with the recommendation of TRU, the
provisions are made as per the Sl. No 14 of Notification No 29/2018
dated 31.12.2018 i.e. Security services (supply of security personnel)
provided by any registered person other than a body corporate to a
registered person, except Government Departments which have taken
registration for TDS and entities registered under composition
scheme, are put under RCM.




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Agenda 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
GST Council in its 31st Meeting held on 22.12.2018 has recommended that the CGST
(Amendment) Act, 2018; IGST (Amendment) Act, 2018; UTGST (Amendment) Act, 2018, the
GST (Compensation to States) Amendment Act, 2018 (hereafter referred to as the GST
Amendment Acts) and all the SGST (Amendment) Acts are to be brought in force with effect
from 01.02.2019.
2. In this regard, the Law Committee examined the provisions of the GST Amendment Acts,
in conjunction with the CGST Act, 2017, and the IGST Act, 2017 (hereafter referred to as the
Principal Acts), and proposed to bring into force all the provisions of these four GST Amendment
Acts, except the ones mentioned below:
(i) Provisions of the CGST (Amendment) Act, 2018:
(a) Section 17 and Section 18: These sections intend to make amendments to the current
return system (by amending section 39 of the CGST Act, 2017) and introduce
provisions relating to introduction of the new system (by inserting section 43A of
the CGST Act, 2017). However, till the time the new return system is introduced
and is made mandatory, the present system of filing of returns are required to be in
place. Therefore, it is proposed that these provisions may be notified only on the
date of introduction of the new return system.
(b) Section 8(b): The said sub-section amends section 16 of the Principal Act to bring
in reference to the newly proposed section 43A. Since, it has been proposed that
section 43A of the amendment Act may not be notified at present, the said sub-
section of the amendment Act may also be notified as and when section 17 and
section 18 are notified.
(c) Section 20(a): The said sub-section amends sub-section (2) of section 49 of the
principal Act to bring in reference to the newly proposed section 43A. Since, it has
been proposed that section 43A of the amendment Act may not be notified at
present, the said sub-section of the amendment Act may also be notified as and when
section 17 and section 18 are notified.
(d) Clause (i) of sub-section (b) of section 28 and clause (i) of sub-section (c) of section
28: The said clauses, which links Explanation 1 and Explanation 2 of section 140 to
section 140(1) is not to be notified.
3. Accordingly, approval of the GST Council is sought for notifying the provisions of CGST
(Amendment) Act, 2018; UTGST (Amendment) Act, 2018 and the GST (Compensation to
States) Amendment Act, 2018 and the IGST (Amendment) Act, 2018 except the provisions
contained in section 8(b), 17, 18, 20(a), 28(b)(i) and 28(c)(i) of the CGST (Amendment) Act,
2018. Further States would be required to notify all the provisions of the respective SGST
(Amendment) Acts, except the provisions which correspond to the provisions contained in
section 8(b), 17, 18, 20(a), 28(b)(i) and 28(c)(i) of the CGST (Amendment) Act, 2018. The
provisions of section 8(b), 17, 18, 20(a) of the CGST (Amendment) Act, 2018 and corresponding
provisions in the SGST (Amendment) Acts of the respective States would be notified at a later
date along with the introduction of the new return system. The provisions contained in section
28(b)(i) and 28(c)(i) of the CGST (Amendment) Act, 2018 are not proposed to be notified.
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Agenda Item 6(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
GST Council in its 31st Meeting held on 22.12.2018 has recommended that the CGST
(Amendment) Act, 2018; IGST (Amendment) Act, 2018; UTGST (Amendment) Act, 2018 and
the GST (Compensation to States) Amendment Act, 2018 (hereafter referred to as the GST
Amendment Acts) are to be brought in force with effect from 01.02.2019. Further all the SGST
(Amendment) Acts would also be brought into force with effect from the same date.
2. In this regard, the Law Committee has examined the Notifications issued under the CGST
Act, 2017 and the IGST Act, 2017 (hereafter referred to as the Principal Acts) in conjunction
with the provisions of the GST Amendment Acts, and proposed to amend certain notifications.
The details of the proposed amendments are in Annexure-A.
3. Accordingly, approval of the GST Council is sought for amending the Notifications issued
earlier. Similar amendments are required in corresponding notifications issued by the States
(except in Notification No. 02/2017- Central Tax dated 19-06-2017). The notification carrying
out the said amendments shall be issued after due vetting by the Union Law Ministry.

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Annexure – A
List of Notifications issued earlier in which changes are proposed
Sl. No. No. Subject Amendments Rationale
1
02/2017- Central
Tax dated 19-06-
2017
Appointment of
officers under
CGST Act, 2018
Joint Commissioner
(Appeals) to be
included as proper
officer
This needs to be
streamlined in light
of the amendment
already made in the
CGST Rules (This is
not related to GST
Amendment Acts).
To be done only in
notification issued
under the CGST Act
2
08/2017-Central
Tax dated 27-06-
2017(amended vide
Notification No.
46/2017)
Seeks to notify
the turnover limit
for Composition
Levy for CGST
Notification needs to
be re-aligned with
the Rule 7 of the
CGST Rules
This needs to be
streamlined in light
of the proposed
amendment in the
Rule 7 of CGST
Rules.
3
57/2017-Central tax
dated 15-11-2017
Seeks to
prescribe
quarterly
furnishing
of FORM
GSTR-1 for
those taxpayers
with aggregate
turnover of upto
Rs.1.5 crore
To be finalised after
new return system
design is brought
into force
This is required in
view of the new
return system that is
proposed to be
introduced
To be revisited after
new return is
finalized
4
65/2017-Central tax
dated 15-11-2017
Seeks to exempt
suppliers of
services through
an e-commerce
platform from
obtaining
compulsory
registration
Needs to be amended
for the special
category States. It
needs to read as –
‘State or Union
territory in
accordance with sub-
section (1) of section
22 of the said Act,
read with clause (iii)
of the Explanation to
that section’
This needs to be
revised in view of
the amendment
(section 11 of the
CGST (Amendment)
Act, 2018) proposed
in section 22 of the
CGST Act, 2017
allowing enhancing
of threshold for
certain special
category States
5
07/2017- Integrated
Tax, dated 14-09-
2017
Seeks to amend
the notification in
order to draw a
clear linkage with
goods exempted
from the
Proviso (b) to be
amended “against
serial number 151 in
the Annexure to rule
138”
To draw a clear
linkage with goods
exempted from the
requirement of e-
way Bill under rule
138 of the CGST
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requirement of e-
way Bill under
rule 138 of the
CGST Rules.
Rules (This is not
related to GST
Amendment Acts)
6
10/2017-Integrated
Tax, dated 13-10-
2017
Seeks to exempt
persons making
inter-State
supplies of
taxable services
from registration
under section
23(2)
Needs to be amended
for the special
category States. It
needs to read as –
‘State or Union
territory in
accordance with sub-
section (1) of section
22 of the said Act,
read with clause (iii)
of the Explanation to
that section’
This needs to be
revised in view of
the amendment
(section 11 of the
CGST (Amendment)
Act, 2018) proposed
in section 22 of the
CGST Act, 2017
allowing enhancing
of threshold for
certain special
category states
7
08/2017- Central
Tax (Rate), dated as
amended vide
notification No.
38/2017-Central
Tax (Rate),
10/2018-Central
Tax (Rate),
12/2018- Central
Tax (Rate) and
22/2018-Central
Tax (Rate)
Seeks to
prescribe limit
relating to reverse
charge
To be rescinded
In view of
amendment (section
4 of the CGST
(Amendment) Act,
2018) proposed in
section 9(4) of the
CGST Act, 2017 in
relation to reverse
charge.
8
09/2017-Integrated
Tax (Rate)as
amended by
42/2017- Integrated
Tax (Rate)

S. No. 10D of Table
of this notification is
to be rescinded
This needs to be
revised in view of
the amendment
(section 2 of the
IGST (Amendment)
Act, 2018) proposed
in section 2(6) of the
IGST Act, 2017
allowing realization
of export proceeds
in INR, wherever
allowed by the RBI.
To be carried out by
TRU

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Proposed Consequential changes
Notification No. 02/2017- Central Tax dated 19-06-2017
4. The Commissioners of Central Tax (Appeals) and Additional Commissioners of Central Tax
(Appeals) any officer not below the rank of Joint Commissioner (Appeals) specified in column (2) of
Table III and the central tax officers subordinate to them are hereby vested with the territorial jurisdiction
of the Principal Commissioners of Central Tax or the Commissioners of Central Tax, as the case may
be, specified in the corresponding entry in column (3) of the said Table.
Notification No. 08/2017-Central Tax dated 27-06-2017(amended vide Notification No. 46/2017)
G.S.R. (E).- In exercise of the powers conferred under the proviso to sub-section (1) of section 10 of the
Central Goods and Services Tax Act, 2017 (12 of 2017) (hereinafter referred to as the said Act), the
Central Government, on the recommendations of the Council, hereby prescribes that an eligible
registered person, whose aggregate turnover in the preceding financial year did not exceed seventy five
lakh rupees, may opt to pay, in lieu of the central tax payable by him, an amount of tax calculated at the
rate prescribed in Rule 7 of the CGST Rules, 2017.of,––
(i) one per cent. of the turnover in State in case of a manufacturer,
(ii) two and a half per cent. of the turnover in State in case of persons engaged in
making supplies referred to in clause (b) of paragraph 6 of Schedule II of the said
Act, and
(iii) half per cent. of the turnover in State in case of other suppliers:
Notification No. 65/2017-Central tax dated 15-11-2017
Provided that the aggregate value of such supplies, to be computed on all India basis should not
exceed an amount of ten lakh rupees in case of “special category States” as specified in sub-section (1)
of section 22 of the said Act, read with clause (iii) of the Explanation to the said section sub-clause (g)
of clause (4) of article 279A of the Constitution, other than the State of Jammu and Kashmir.
Notification No. 07/2017- Integrated Tax, dated 14-09-2017
Provided that nothing contained in this notification shall apply to a job-worker –
(a) who is liable to be registered under sub-section (1) of section 22 or who opts to take registration
voluntarily under sub-section (3) of section 25 of the said Act; or
(b) who is involved in making supply of services in relation to the goods mentioned against serial
number 5 151 in the Annexure to rule 138 of the Central Goods and Services Tax Rules, 2017.
Notification No. 10/2017-Integrated Tax, dated 13-10-2017
Provided that the aggregate value of such supplies, to be computed on all India basis, should not exceed
an amount of ten lakh rupees in case of “special category States” as specified in sub-section (1) of section
22 of the said Act, read with clause (iii) of the Explanation to the said section sub-clause (g) of clause
(4) of article 279A of the Constitution, other than the State of Jammu and Kashmir.
Notification No. 09/2017-Integrated Tax (Rate) as amended by Notification No. 42/2017-
Integrated Tax (Rate)
(1) (2) (3) (4) (5)
10D Chapter 99 Supply of services
having place
of supply in
Nepal or Bhutan,
against payment
in Indian
Rupees
Nil Nil


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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
GST Council in its 31st Meeting held on 22.12.2018 has recommended that the CGST
(Amendment) Act, 2018; IGST (Amendment) Act, 2018; UTGST (Amendment) Act, 2018 and
the GST (Compensation to States) Amendment Act, 2018 (hereinafter referred to as the GST
Amendment Acts) are to be brought in force with effect from 01.02.2019. Further all the SGST
(Amendment) Acts would also be brought into force with effect from the same date.
2. In this regard, the Law Committee has examined the Circulars and Orders issued earlier
under the CGST Act, 2017 and the IGST Act, 2017 (hereinafter referred to as the Principal Acts)
in conjunction with the provisions of the GST Amendment Acts, and proposed to amend certain
circulars and orders. The details of the proposed amendments are in Annexure-A.
3. One of the proposals agreed to by the Law Committee relates to rescinding of removal of
difficulty Order No. 01/2017-Central Tax dated 13.10.2017 which was issued to remove
difficulties in implementing provisions of composition scheme. The Law Committee has further
recommended issuance of a new removal of difficulty Order in order to provide 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.
4. Accordingly, approval of the GST Council is sought for amending the Circulars and Orders
issued earlier (as proposed in para 2 above). Similar amendments are required in the Circulars
and Orders issued by the States. Further, approval of the GST Council is also sought for issuance
of the new removal of difficulty Order (as proposed in para 3 above). The removal of difficulty
Order would be issued in consultation with the Union Law Ministry. States would also be
required to issue corresponding removal of difficulty Order.

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Annexure – A
List of Circulars and Orders issued earlier in which changes are proposed
Sl.
No.
No. Subject Amendments Rationale
1
7/7/2017
dated
01.09.2017
System based
reconciliation of
information
furnished in FORM
GSTR-1 and FORM
GSTR-2 with
FORM GSTR-3B
To be rescinded after
the new return system
is brought into force as
FORM GSTR-2 has
been kept in abeyance
To be revisited after
section 43A is
notified.
The process of
system-based
reconciliation in the
proposed new return
scheme is different
from that envisaged
under the earlier
system, and hence
requires to be
rescinded.
2
8/8/2017
dated
04.10.2017
Clarification on
issues related to
furnishing of
Bond/LUT for
exports
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’)
This needs to be
revised in view of the
amendment (section 2
of the IGST
(Amendment) Act,
2018) proposed in
section 2(6) of the
IGST Act, 2017
allowing realization of
export proceeds in
INR, wherever
allowed by the RBI.
3
15/15/2017
dated
06.11.2017
Due date for
generation of FORM
GSTR-2A and
FORM GSTR-1A in
accordance with the
extension of due date
for filing FORM
GSTR-1 and FORM
GSTR-2
respectively
To be rescinded after
the new return system
is brought into force
To be revisited after
section 43A is
notified.
This is required as
features of new return
system are different
from the existing
return system
4
26/26/2017
dated
29.12.2017
Filing of returns
under GST
To be rescinded after
the new return system
is brought into force
To be revisited after
section 43A is
notified.
This is required as
features of new return
system are different
from the existing
return system
5
38/12/2018
dated
26.03.2018
Clarifications on
issues related to Job
Work
1. Amendment
required in for para 2
to replace the time of
one year/3years to
This needs to be
revised in view of the
amendment (section
29 of the CGST
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read as “within the
time period specified
in section 143”.
2. Similar
amendment required
in para 3 to replace the
time of one
year/3years to read as
“within the time
period specified in
section 143”.
3. Amendment
required in para 6.1 to
provide for
mentioning threshold
limit of states who are
special category but
have opted for a
threshold limit of Rs.
20 lakhs (presently
only J & K is
mentioned therein).
4. Para 9.4(i) and
9.6containing
reference to section
9(4) of the CGST Act
needs to be removed.
(Amendment) Act,
2018) proposed in
section 143 of the
CGST Act, 2017
empowering the
Commissioner to
extend the period for
return of inputs and
capital goods from the
job worker.
Further on account of
amendment (section 4
of the CGST
(Amendment) Act,
2018) proposed in
section 9(4) of the
CGST Act, 2017 in
relation to reverse
charge, certain
amendments to the
Circular are required.
6
41/15/2018
dated
13.04.2018
E-way bill
verification related
issues and forms
7 days to be changed
to 14 days at - 7 days
to be changed to 14
days at – (i) para 2(k)
(ii) MOV08 – 4th para
(iii) MOV 09-10th para
This needs to be
revised in view of the
amendment (section
27 of the CGST
(Amendment) Act,
2018) proposed in
section 129 of the
CGST Act, 2017
allowing 14 days for
owner/transporter to
pay tax/penalty for
seized goods
7
58/32/2018
dated
04.09.2018
Recovery of arrears
of wrongly availed
CENVAT credit
under the existing
law and inadmissible
transitional credit.
(i) Recovery vide
FORM DRC-
03&FORM DRC-07
also needs to be
mentioned in the
circular.
(ii) Provision of
reversal of transitional
credit through FORM
Modes of recovery
have been streamlined
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GSTR-3B needs to be
revisited.
8
69/43/2018
dated
26.10.2018
Circular on Standard
Operating Procedure
for Processing of
Applications for
Cancellation of
Registration
submitted in FORM
GST REG-16
Suspension as
mentioned in Section
21A of CGST Act
needs to be mentioned
(by amending para 11
to mention that
registration may be
suspended and notices
may not be issued
while processing
applications for
suspension of
registration)
This needs to be
revised in view of the
amendment (section
14 of the CGST
(Amendment) Act,
2018) proposed in
section 29 of the
CGST Act, 2017
allowing suspension
of registration
9
Order-
01/2017-
Central
Tax dated
13.10.2017
To remove
difficulties in
implementing
provisions of
composition scheme.
To be rescinded
and reissued after
obtaining GST
Council
recommendation.
This needs to be
rescinded in view of
the amendment
(section 5 of the
CGST (Amendment)
Act, 2018) proposed
in section 10 of the
CGST Act, 2017
making changes to the
Composition scheme,
difficulties regarding
which were removed
by the said removal of
difficulty order.
10
03/01/2018
-IGST
Circular on
applicability of IGST
on goods supplied
while being
deposited in a
customs bonded
warehouse
To be rescinded
This needs to be
revised in view of the
amendment (section
32 of the CGST
(Amendment) Act,
2018) proposed in
Schedule III of the
CGST Act, 2017
which declares supply
of warehoused goods
to any person before
clearance for home
consumption as
neither supply of
goods nor supply of
services.



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Proposed Consequential Changes
Circular No. 8/8/2017 dated 04.10.2017
2(k) Realization of export proceeds in Indian Rupee: Attention is invited to para A (v) Part-
I of RBI Master Circular No. 14/2015-16 dated 01stJuly, 2015 (updated as on 05th November,
2015), which states that “there is no restriction on invoicing of export contracts in Indian
Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the
Foreign Exchange Management Act, 1999. Further, in terms of Para 2.52 of the Foreign Trade
Policy (2015-2020), all export contracts and invoices shall be denominated either in freely
convertible currency or Indian rupees but export proceeds shall be realized in freely
convertible currency. However, export proceeds against specific exports may also be realized
in rupees, provided it is through a freely convertible Vostro account of a non-resident bank
situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal
or Bhutan”. Further, attention is invited to the amendment to section 2(6) of the IGST Act,
2017 which allows realization of export proceeds of services in INR, wherever allowed by the
RBI.
Accordingly, it is clarified that the acceptance of LUT for supplies of goods or services to
countries outside India Nepal or Bhutan or SEZ developer or SEZ unit will be permissible
irrespective of whether the payments are made in Indian currency or convertible foreign
exchange as long as they are in accordance with the applicable RBI guidelines. It may also be
noted that the supply of services to SEZ developer or SEZ unit under LUT will also be
permissible on the same lines. The supply of services, however, to Nepal or Bhutan will be
deemed to be export of services only if the payment for such services is received by the supplier
in convertible foreign exchange.
Circular No. 69/43/2018 dated 26.10.2018
11. It is pertinent to mention here that section 29 of the CGST Act has been amended by the
CGST (Amendment) Act, 2018 to provide for “Suspension” of registration. The intent of the
said amendment is to ensure that a taxpayer is freed from the routine compliances, including
filing returns, under GST Act during the pendency of the proceedings related to cancellation.
Although the provisions of CGST (Amendment) Act, 2018 have not yet been brought into
force,it will be prudent for Accordingly, the field formations may not to issue notices for non-
filing of return for taxpayers who have already filed an application for cancellation of
registration under section 29 of the CGST Act. However Further, the requirement of filing a
final return, as under section 45 of the CGST Act, remains unchanged.
Circular No. 58/32/2018 dated 04.09.2018
3. It may be noted that all such liabilities may be discharged by the taxpayers, either
voluntarily in FORM GST DRC-03 or may be recovered vide order uploaded in FORM GST
DRC-07, and payment against the said order shall be made in FORM GST DRC-03. It is
further clarified that the alternative method of reversingCurrently, the functionality to record
this liability in the electronic liability register is not available on the common portal.
Therefore, it is clarified that as an alternative method, taxpayers may reverse the wrongly
availed CENVAT credit under the existing law and inadmissible transitional credit through
Table 4(B)(2) of FORM GSTR-3B would no longer be available to taxpayers. The applicable
interest and penalty shall apply in respect of all such amounts, shall which shall also be paid
in FORM GST DRC-03.
Circular No. 41/15/2018 dated 13.04.2018
2(k) In case the proposed tax and penalty are not paid within seven fourteen days from the date
of the issue of the order of detention in FORM GST MOV-06, the action under section 130
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of the CGST Act shall be initiated by serving a notice in FORM GST MOV-10, proposing
confiscation of the goods and conveyance and imposition of penalty.
MOV-08
And if all taxes, interest, penalty, fine and other lawful charges demanded by the proper officer
are duly paid within seven fourteen days of the date of detention being made in writing by the
said proper officer, this obligation shall be void.
MOV-09
10. You are hereby directed to make the payment forthwith/not later than seven fourteen days
from the date of the issue of the order of detention in FORM GST MOV-06, failing which
action under section 130 of the Central/State Goods and Services Tax Act /section 21 of the
Union Territory Goods and Services Tax Act or section 20 of the Integrated Goods and
Services Act shall be initiated.
Circular No. 38/12/2018 dated 26.03.2018
2. As per clause (68) of section 2 of the CGST Act, 2017, “job work” means any treatment or
process undertaken by a person on goods belonging to another registered person and the
expression “job worker” shall be construed accordingly. The registered person on whose goods
(inputs or capital goods) job work is performed is called the “Principal” for the purposes of
section 143 of the CGST Act. The said section which encapsulates the provisions related to
job work, provides that the registered principal may, without payment of tax, send inputs or
capital goods to a job worker for job work and, if required, from there subsequently to another
job worker and so on. Subsequently, on completion of the job work (by the last job worker),
the principal shall either bring back the goods to his place of business or supply (including
export) the same directly from the place of business/premises of the job worker within the time
specified under section 143one year in case of inputs or within three years in case of capital
goods (except moulds and dies, jigs and fixtures or tools).
3. It may be noted that the responsibility of keeping proper accounts of the inputs and capital
goods sent for job work lies with the principal. Moreover, if the time frame specified under
section 143of one year / three years for bringing back or further supplying the inputs / capital
goods is not adhered to, the activity of sending the goods for job work shall be deemed to be
a supply by the principal on the day when the said inputs / capital goods were sent out by him.
Thus, essentially, sending goods for job work is not a supply as such, but it acquires the
character of supply only when the inputs/capital goods sent for job work are neither received
back by the principal nor supplied further by the principal from the place of business / premises
of the job worker within the specified time period (under section 143) one/three years of being
sent out. It may be noted that the responsibility for sending the goods for job work as well as
bringing them back or supplying them has been cast on the principal.
6.1 Doubts have been raised about the requirement of obtaining registration by job workers
when they are located in the same State where the principal is located or when they are located
in a State different from that of the principal. It may be noted that the job worker is required
to obtain registration only if his aggregate turnover, to be computed on all India basis, in a
financial year exceeds the specified threshold limit as specified in sub-section (1) of section
22 of the said Act, read with clause (iii) of the Explanation to the said section (i.e. Rs 20 lakhs
or Rs. 10 lakhs in case of special category States except Jammu & Kashmir) in case both the
principal and the job worker are located in the same State. Where the principal and the job
worker are located in different States, the requirement for registration flows from clause (i) of
section 24 of the CGST Act which provides for compulsory registration of suppliers making
any inter-State supply of services. However, exemption from registration has been granted in
case the aggregate turnover of the inter-State supply of taxable services does not exceed the
specified threshold limit as specified in sub-section (1) of section 22 of the said Act, read with
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clause (iii) of the Explanation to the said section Rs 20 lakhs or Rs. 10 lakhs in case of special
category States except Jammu & Kashmir in a financial year vide notification No. 10/2017 –
Integrated Tax dated 13.10.2017. Therefore, it is clarified that a job worker is required to
obtain registration only in cases where his aggregate turnover, to be computed on all India
basis, in a financial year exceeds the threshold limit regardless of whether the principal and
the job worker are located in the same State or in different States.
9.4.i. Supply of job work services: The job worker, as a supplier of services, is liable to pay
GST if he is liable to be registered. He shall issue an invoice at the time of supply of the
services as determined in terms of section 13 read with section 31 of the CGST Act. The value
of services would be determined in terms of section 15 of the CGST Act and would include
not only the service charges but also the value of any goods or services used by him for
supplying the job work services, if recovered from the principal. Doubts have been raised
whether the value of moulds and dies, jigs and fixtures or tools which have been provided by
the principal to the job worker and have been used by the latter for providing job work services
would be included in the value of job work services. In this regard, attention is invited to
section 15 of the CGST Act which lays down the principles for determining the value of any
supply under GST. Importantly, clause (b) of sub-section (2) of section 15 of the CGST Act
provides that any amount that the supplier is liable to pay in relation to the supply but which
has been incurred by the recipient will form part of the valuation for that particular supply,
provided it has not been included in the price for such supply. Accordingly, it is clarified that
the value of such moulds and dies, jigs and fixtures or tools may not be included in the value
of job work services provided its value has been factored in the price for the supply of such
services by the job worker. It may be noted that if the job worker is not registered, GST would
be payable by the principal on reverse charge basis in terms of the provisions contained in
section 9(4) of the CGST Act. However, the said provision has been kept in abeyance for the
time being.
9.6Thus, if the inputs or capital goods are neither returned nor supplied from the job worker’s
place of business / premises within the specified time period, the principal would issue an
invoice for the same and declare such supplies in his return for that particular month in which
the time period of one year / three years has expired. The date of supply shall be the date on
which such inputs or capital goods were initially sent to the job worker and interest for the
intervening period shall also be payable on the tax. If such goods are returned by the job worker
after the stipulated time period, the same would be treated as a supply by the job worker to the
principal and the job worker would be liable to pay GST if he is liable for registration in
accordance with the provisions contained in the CGST Act read with the rules made
thereunder. It may be noted that if the job worker is not registered, GST would be payable by
the principal on reverse charge basis in terms of the provisions contained in section 9(4) of
the CGST Act. However, the said provision has been kept in abeyance for the time being.
Further, there is no requirement of either returning back or supplying the goods from the job
worker’s place of business/premises as far as moulds and dies, jigs and fixtures, or tools are
concerned.


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Agenda Item 6(iv): Proposal for amendment in CGST Rules, 2017
In the Law Committee meeting held on 3rd – 4th January 2019, the Law Committee
recommended minor amendment in the CGST Rules, 2017 to ease the process of refunds and to
extend date of examination for GST Practitioners. The recommended amendment to CGST Rules
along with the rationale is provided in Table below.
Table: Amendment in CGST Rules, 2017
Sl.
No.
Proposed Amendment Rationale
1 Second Proviso to Rule 83(3):
Provided further that no person to whom
the provisions of clause (b) of sub-rule (1)
apply shall be eligible to remain enrolled
unless he passes the said examination
within a period of [eighteen months thirty
months] from the appointed date.

Only 1439 candidates out of 4106
candidates who have enrolled for GST
Practitioner have cleared the examination.
723 candidates failed and 229 candidates
did not appear for the examination.

It may be noted that as per the said sub-
rule, all such practitioners were required
to clear the examination within a period of
eighteen months from the appointed date
i.e. by 31.12.2018.

In view of the status of the result as well
as still ongoing process of enrolment
under said sub-rule, it is recommended
that period of clearing this exam may be
extended to 31.12.2019.
2 Sub-clause (f) of Clause (2) of Rule 89:
Recommendation of the 31st GST Council
for amendment in Sub-clause (f) of Clause
(2) of Rule 89:
(f) a declaration to the effect by that the
Special Economic Zone unit or the Special
Economic Zone developer to the effect that
it has not availed the input tax credit of the
tax paid by the supplier of goods or
services or both, in a case where the
refund is on account of supply of goods or
services made to a Special Economic Zone
unit or a Special Economic Zone
developer;

It is now proposed to amend in Sub-clause
(f) of Clause (2) of Rule 89 as follows
instead of what was approved earlier:

(f) a declaration to the effect that tax has
not been collected from the Special
Economic Zone unit or the Special
Economic Zone developer has not availed
the input tax credit of the tax paid by the
supplier of goods or services or both, in a
case where the refund is on account of
supply of goods or services made to a
In the 31st GST Council minor
amendment in the language of sub-clause
(f) of Clause (2) of Rule 89 was
recommended.

On further discussion, it was observed
that since this declaration was to be given
by the supplier who is supplying goods or
services to the SEZ unit or developer, the
declaration should be limited to the fact
that no tax has been collected on such
transaction. As the supplier, cannot
declare / certify on behalf of the SEZ unit
or developer that no tax has been collected
and no ITC has been availed.

Further, if such declaration were to be
provided by the SEZ Unit or developer
then the supplier will have to take this
declaration from the SEZ Unit or
Developer and hence the overall process
of refund will be delayed.

Therefore, it is proposed that Rule
89(2)(f) may be amended to take such
declaration from the supplier providing
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Special Economic Zone unit or a Special
Economic Zone developer;
goods or services to the SEZ Unit or
Developer only.
3 Declaration under Rule 89(2)(f) in
FORM RFD-01A:

I hereby declare that tax has not been
collected from the Special Economic Zone
unit /the Special Economic Zone developer
in respect of supply of goods or services or
both covered under this refund claim has
not availed of the input tax credit of the tax
paid by the applicant, covered under this
refund claim.

Signature
Name –
Designation / Status
Amendment to FORM RFD-01A
consequent to amendment in Sub-clause
(f) of Clause (2) of Rule 89 above
4 Sub-Rule (2) and (3) of Rule 91:

(2) The proper officer, after scrutiny of
the claim and the evidence submitted in
support thereof and on being prima facie
satisfied that the amount claimed as refund
under sub-rule (1) is due to the applicant in
accordance with the provisions of sub-
section (6) of section 54, shall make an
order in FORM GST RFD-04, sanctioning
the amount of refund due to the said
applicant on a provisional basis within a
period not exceeding seven days from the
date of the acknowledgement under sub-
rule (1) or sub-rule (2) of rule 90.

Provided that the order issued in FORM
GST RFD-04 is not required to be
revalidated by the proper officer.

(3) The proper officer shall issue a
payment advice in FORM GST RFD-05
for the amount sanctioned under sub-rule
(2) and the same shall be electronically
credited to any of the bank accounts of the
applicant mentioned in his registration
particulars and as specified in the
application for refund.

Provided that the payment advice in
FORM GST RFD-05 is required to be
revalidated where the refund has not been
disbursed within the same financial year in
which the said payment advice was issued.

Sub-Rule (4) of Rule 92:

(4) Where the proper officer is
satisfied that the amount refundable under
Representations have been received from
various formations about issues leading to
delay in disbursement of refund. One such
issue pertains to the need of revalidation
of refund order i.e. FORM RFD-04/06 in
case of non-issuance of FORM RFD-05
(payment advice) within a period of 3
months from the date of sanction order
(FORM RFD-04/06).

In this regard attention is drawn to the
Rule 145 of the Receipt & Payments
Rules, 1983, (R&P Rules for short) of the
Government of India which reads as
follows-
Rule 145. Period of validity of refund
order — Unless otherwise provided by
any law, rule or departmental regulation,
an order for refund of revenue shall
remain in force for a period of three
months only from the date of its issue and
no payment shall be made on its authority
thereafter unless it is revalidated by the
sanctioning authority.
It was further clarified by the O/o Pr. CCA
vide letter dated 5.12.2018 that since the
GST Law or Rules do not provide for re-
validation of GST Refund orders, hence
the provisions of Rule 145 of R&P Rules
will be applicable
.
If any Payment Advice (FORM RFD-05)
is not issued within 3 months of the
issuance of the Refund Order (FORM
RFD-04/06) then the refund order would
be required to be re-validated in terms of
the Rule 145 of R&P Rules.
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sub-rule (1) or sub-rule (2) is payable to the
applicant under sub-section (8) of section
54, he shall make an order in FORM GST
RFD-06 and issue a payment advice in
FORM GST RFD-05 for the amount of
refund and the same shall be electronically
credited to any of the bank accounts of the
applicant mentioned in his registration
particulars and as specified in the
application for refund.

Provided that the order issued in FORM
GST RFD-06 is not required to be
revalidated by the proper officer:

Provided further that the payment advice in
FORM GST RFD-05 is required to be
revalidated where the refund has not been
disbursed within the same financial year in
which the said payment advice was issued.

The above position of law is leading to
delay in disbursement of refund. To
streamline this and to align our provisions
with the R&P Rules, it is proposed that
following provisos may be added in rule
91 and 92 of the CGST Rules.

2. Accordingly, the approval of the GST Council is sought so that the above detailed
amendments in the CGST Rules, 2017 may be carried out. Pari materia changes would also be
required to be carried out in the respective SGST Rules. The notification carrying out the said
amendments shall be issued after due vetting by the Union Law Ministry.


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Agenda Item 7: Review of Revenue Position
In the 31st GST Council meeting held on 22nd December, 2018, revenue collection
figures for September to November, 2018 were placed before the Council. The Table 1 below
gives the details of revenue collected as Central Goods and Services Tax (CGST), State
Goods and Services Tax (SGST), Integrated Goods and Services Tax (IGST) and Cess in the
month of December, 2018.
Table 1*: GST revenue for December, 2018
(Figures in Rs. crore)
MONTH Oct-18 Nov-18 Dec-18
CGST 16,464 16,812 16,442
SGST 22,826 23,070 22,459
IGST 53,419 49,725 47,936
Domestic 26,511 25,593 24,301
Imports 26,908 24,133 23,635
Comp Cess 8,000 8,031 7,888
Domestic 7,045 7,189 7,051
Imports 955 842 838
Total 1,00,710 97,637 94,726
*Figures rounded to nearest whole number

2. Table 2 below shows the IGST collected, refunded and settled/ apportioned during the
period

Table 2: IGST Collection/Settlement/Apportionment/Refund in December’18
(Figures in Rs. crore)
Month Oct-18 Nov-18 Dec-18
IGST Collections 53,419 49,725 47,936
IGST Refunds 5,864 7,813 6,096
IGST Settlement 62,589 33,966 51,202
CGST 17,486 18,262 18,409
SGST 15,103 15,704 14,793
CGST ad hoc 15,000 - 9,000
SGST ad hoc 15,000 - 9,000
Balance during year 9,109 17,056 7,694
Figures rounded to nearest whole number
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89885
103459
94016
95,610
96,483
93,960
94,442
1,00,710
97,637
94,726
80000
85000
90000
95000
100000
105000
Comparison of Gross GST Revenue (Average 2017-18 & April'18
to Dec'18)
(Figures in Rs. crore)
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Revenue Trends

3. The details of state-wise revenue to be protected and percentage revenue shortfall of GST
collections between April-December, 2018 as compared to the period August-17 to March-18
are given in Table 3 below:
S. No. State Aug-17 to March-18 Apr-18 to Dec-18
1 Puducherry 45% 42%
2 Himachal Pradesh 42% 35%
3 Uttarakhand 39% 32%
4 Bihar 38% 19%
5 Punjab 37% 36%
6 J & K 37% 27%
7 Meghalaya 32% 13%
8 Chhattisgarh 31% 25%
9 Odisha 31% 25%
10 Tripura 30% 17%
11 Madhya Pradesh 26% 15%
12 Jharkhand 26% 14%
13 Goa 23% 24%
14 Karnataka 22% 20%
15 Assam 21% 6%
16 Rajasthan 18% 9%
17 Haryana 18% 15%
18 Kerala 16% 15%
19 Nagaland 15% -18%
20 Gujarat 14% 14%
21 West Bengal 13% 9%
22 Uttar Pradesh 12% 6%
23 Sikkim 9% -12%
24 Andhra Pradesh 7% -3%
25 Telangana 6% 1%
26 Delhi 6% 21%
27 Tamil Nadu 4% 5%
28 Maharashtra 3% 5%
29 Manipur 0% -30%
30 Arunachal Pradesh -1% -47%
31 Mizoram -4% -51%
Grand Total 16% 13%
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-60%
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Trends in Return Filing
4. The table 4 below shows the trend in returns in FORM GSTR-3B till due date and till date for return
periods upto November, 2018
Tax
Period
Taxpayers
eligible to file
Filed till due
date
% till due
date of filing
Filed till date 3rd
Jan, 2019

% till date
3rd Jan, 2019
Jul-17 74,61,214 38,34,877 51.40% 65,22,950 87.42%
Aug-17 75,32,807 27,25,183 36.18% 70,76,360 93.94%
Sep-17 79,25,831 39,34,256 49.64% 74,00,449 93.37%
Oct-17 81,54,303 43,68,711 53.58% 71,35,996 87.51%
Nov-17 79,92,517 49,13,065 61.47% 71,70,724 89.72%
Dec-17 81,82,277 54,26,278 66.32% 72,27,719 88.33%
Jan-18 83,63,437 53,94,018 64.50% 73,10,247 87.41%
Feb-18 85,45,661 54,51,004 63.79% 73,98,778 86.58%
Mar-18 87,08,493 52,83,962 60.68% 74,60,566 85.67%
Apr-18 88,17,798 56,38,813 63.95% 74,29,626 84.26%
May-18 91,22,309 56,18,925 61.60% 75,17,863 82.41%
Jun-18 93,16,710 58,39,034 62.67% 75,55,632 81.10%
Jul-18 94,70,282 64,39,259 67.99% 75,59,211 79.82%
Aug-18 96,15,273 57,02,349 59.31% 75,45,416 78.47%
Sep-18 96,57,239 64,19,403 66.47% 74,52,775 77.17%
Oct-18 97,57,664 53,98,369 55.32% 72,04,912 73.84%
Nov-18 9,846,645 6,336,787 64.35% 7,203,476 73.16%
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5. Till now, the highest level of return filing was observed for December, 2017 and after that, a
downward trend was being observed. However, for July, 2018, highest level of return filing till now, at
68% has been observed. The next two tables show the State-wise breakup of this data.
51.40%
36.18%
49.64%
53.58%
61.47%
66.32%
64.50% 63.79%
60.68%
63.95%
61.60% 62.67%
67.99%
59.31%
66.47%
55.32%
64.35%
0%
10%
20%
30%
40%
50%
60%
70%
80%
% of filing till due date
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Table 5: Return filling due date
State
Code
State/UT Name Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18
1 Jammu and Kashmir 60% 59% 59% 64% 59% 63% 59% 61%
2 Himachal Pradesh 69% 67% 65% 72% 63% 70% 66% 68%
3 Punjab 80% 78% 76% 82% 74% 79% 75% 76%
4 Chandigarh 75% 73% 73% 79% 69% 78% 73% 75%
5 Uttarakhand 59% 58% 57% 63% 56% 63% 57% 61%
6 Haryana 70% 69% 68% 73% 63% 71% 64% 67%
7 Delhi 64% 64% 63% 68% 59% 66% 59% 62%
8 Rajasthan 68% 67% 65% 71% 63% 71% 64% 68%
9 Uttar Pradesh 71% 70% 68% 73% 66% 73% 67% 70%
10 Bihar 55% 54% 53% 60% 54% 58% 52% 57%
11 Sikkim 55% 54% 54% 62% 54% 58% 52% 55%
12 Arunachal Pradesh 30% 30% 30% 36% 31% 35% 32% 34%
13 Nagaland 30% 33% 34% 41% 37% 41% 36% 39%
14 Manipur 34% 33% 31% 44% 38% 43% 37% 37%
15 Mizoram 42% 42% 42% 47% 44% 48% 43% 44%
16 Tripura 56% 56% 56% 64% 58% 61% 59% 61%
17 Meghalaya 48% 49% 51% 57% 53% 57% 54% 54%
18 Assam 41% 42% 42% 48% 41% 44% 42% 44%
19 West Bengal 67% 65% 65% 70% 62% 67% 64% 67%
20 Jharkhand 59% 58% 58% 66% 58% 63% 57% 61%
21 Odisha 58% 54% 54% 62% 52% 59% 56% 57%
22 Chhattisgarh 52% 51% 52% 62% 51% 59% 51% 57%
23 Madhya Pradesh 60% 61% 61% 69% 60% 67% 61% 66%
24 Gujarat 72% 72% 71% 76% 68% 75% 67% 73%
25 Daman and Diu 62% 63% 62% 69% 58% 67% 59% 62%
26 Dadra and Nagar Haveli 61% 61% 61% 66% 56% 65% 57% 60%
27 Maharashtra 62% 61% 61% 67% 56% 65% 59% 63%
29 Karnataka 62% 62% 62% 67% 60% 65% 61% 63%
30 Goa 56% 56% 56% 61% 52% 60% 55% 55%
31 Lakshadweep 25% 22% 22% 22% 21% 24% 20% 25%
32 Kerala 59% 58% 58% 55% 40% 62% 52% 58%
33 Tamil Nadu 59% 59% 59% 63% 57% 62% 57% 62%
34 Puducherry 58% 57% 58% 63% 54% 63% 55% 58%
35 Andaman & Nicobar Islands 23% 24% 27% 32% 25% 30% 25% 27%
36 Telangana 56% 55% 54% 60% 49% 57% 54% 57%
37 Andhra Pradesh 60% 61% 60% 67% 57% 63% 61% 63%
97 Other Territory 54% 55% 65% 71% 60% 77% 68% 68%

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Table 6: Return filling till date (03/01/2019)
State
Code
State/UT Name Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18
1 Jammu and Kashmir 83% 81% 80% 78% 77% 75% 71% 70%
2 Himachal Pradesh 87% 84% 83% 82% 81% 79% 77% 76%
3 Punjab 92% 90% 89% 89% 88% 87% 85% 85%
4 Chandigarh 89% 88% 88% 88% 88% 87% 85% 84%
5 Uttarakhand 80% 79% 77% 76% 74% 73% 70% 70%
6 Haryana 87% 86% 85% 83% 82% 80% 77% 76%
7 Delhi 84% 83% 81% 79% 78% 77% 73% 72%
8 Rajasthan 86% 84% 82% 81% 80% 80% 76% 76%
9 Uttar Pradesh 87% 86% 84% 83% 82% 81% 78% 78%
10 Bihar 79% 77% 75% 73% 72% 70% 66% 66%
11 Sikkim 83% 82% 79% 78% 76% 73% 67% 65%
12 Arunachal Pradesh 62% 60% 57% 55% 52% 48% 42% 41%
13 Nagaland 64% 63% 61% 59% 57% 54% 49% 45%
14 Manipur 65% 64% 62% 60% 57% 54% 49% 47%
15 Mizoram 71% 69% 67% 65% 63% 60% 54% 49%
16 Tripura 79% 78% 76% 75% 74% 72% 69% 68%
17 Meghalaya 75% 74% 73% 71% 70% 67% 63% 60%
18 Assam 68% 66% 64% 62% 60% 58% 54% 53%
19 West Bengal 86% 84% 82% 81% 80% 78% 74% 74%
20 Jharkhand 84% 82% 81% 79% 78% 76% 72% 71%
21 Odisha 79% 76% 74% 73% 72% 70% 66% 66%
22 Chhattisgarh 84% 81% 81% 80% 78% 75% 70% 70%
23 Madhya Pradesh 87% 85% 84% 84% 82% 81% 77% 76%
24 Gujarat 90% 88% 87% 86% 85% 84% 81% 81%
25 Daman and Diu 86% 85% 84% 82% 81% 78% 74% 73%
26 Dadra and Nagar Haveli 86% 84% 83% 81% 79% 76% 71% 70%
27 Maharashtra 83% 81% 80% 78% 77% 75% 71% 70%
29 Karnataka 83% 81% 80% 78% 77% 75% 72% 72%
30 Goa 80% 78% 76% 75% 73% 71% 66% 64%
31 Lakshadweep 38% 37% 35% 34% 32% 29% 27% 28%
32 Kerala 87% 86% 84% 83% 81% 79% 75% 73%
33 Tamil Nadu 79% 77% 76% 75% 74% 73% 71% 71%
34 Puducherry 81% 79% 77% 77% 75% 73% 70% 69%
35
Andaman & Nicobar
Islands
57% 55% 52% 49% 47% 43% 37% 36%
36 Telangana 82% 80% 78% 77% 75% 73% 70% 70%
37 Andhra Pradesh 84% 82% 81% 80% 80% 79% 76% 74%
97 Other Territory 81% 80% 82% 82% 81% 79% 76% 77%
6. The revenue position for the months of October, November, December 2018 under GST is placed
for information of the Council.

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Agenda Item 8: Allowing ITGRC to consider non-technical issues (errors apparent on the face
of record)
The GST Council, in its 26th meeting held on 10th March 2018, approved setting up of a
Grievance Redressal Mechanism to address IT issues or IT glitches where owing to glitches of GSTN,
relief was needed to be given to a section of taxpayers such as allowing filing of any Form or Return
prescribed in law or amending any Form or Return that has already been filed.
2. The Council authorized the GIC (GST Implementation Committee) to act as ITGRC (IT
Grievance Redressal Committee) with participation of CEO, GSTN and the DG(Systems), CBIC. As
per Circular 39/13/2018 dated 03.04.2018, IT Grievance Redressal Mechanism was put in place.
However, GSTN is receiving various references through nodal officers and Writs in High Courts where
non-technical issues were involved. The ITGRC could not recommend such cases, as it was empowered
to take decision only in the cases of technical glitches. Further, TRAN1/TRAN2 cases are unique in
nature as no appeal mechanism is available under GST Act, hence more and more taxpayers are
approaching the Hon’ble High Courts and obtaining favourable orders in view of the fact that Hon’ble
Courts were sympathetic and were of the view that bona fide errors of taxpayer should be considered
by the Government.
3. In some cases, Hon’ble High Courts have given specific directions to take up the cases as per
grievance redressal mechanism due to the fact that taxpayer had made some clerical mistakes apparent
from records while filing TRAN 1. The ITGRC was of the view that a Standard Operating Procedure
for dealing with representation of taxpayers relating to non-IT issues needed to be evolved.
4. In its 3rd meeting held on 26th October 2018, the ITGRC recommended that the issue may be
discussed by the Council and ITGRC may be empowered to consider and decide the cases for extending
the benefit of allowing filing of any Form or Return prescribed in law or amending any Form or Return
already filed for bona fide non-technical mistakes of the taxpayers.
5. Subsequently, a draft Agenda Item was prepared by the GST Council Secretariat. The draft
agenda item was discussed in the Law Committee Meeting on 10.12.2018 which recommended that
expanding the mandate of ITGRC would amount to allowing revision of TRAN 1 in specific cases for
which there is no provision in law. Consequently, the agenda item was not placed before the GST
Council in its 31st Meeting.
6. However, while reviewing the decisions of the ITGRC, the GST Council was apprised of the
matter and the Council decided that the issue needs further examination in the next meeting of the Law
Committee, with participation from other States which are not members of the Law Committee.
7. Accordingly, in the combined meeting of the Law Committee and Fitment Committee, along
with participation of officers from the States of Andhra Pradesh, Chattisgarh, Haryana, Karnataka,
Tamil Nadu and Telangana, in its meeting held on 04.01.2019 felt that the scope of the IT-GRC may
be extended to consider TRAN-1 cases where the following conditions are satisfied: -
i. The Hon’ble High Court has ordered the case to be considered on merit;
ii. 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 the there is a mistake like wrong entry of an amount e.g.
Rs.10,000/- entered for Rs.1,00,000/-); and
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iii. The case should be recommended to the IT-GRC 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, the State
authorities, notwithstanding the fact that the taxpayer is allotted to the Central or the State
authority).
8. Accordingly, the GST Council may authorise ITGRC to look at those cases where it has already
taken a decision based on the consideration that it is an issue of non-IT glitch, if it fulfils the conditions
stated in Paragraph 7. The GST Council may also authorize the ITGRC to evolve a Standard Operating
Procedure (SOP) to deal with non-technical issues that are referred to it within an appropriate time
window.


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Agenda Item 9: Use of Radio-frequency Identification (RFID) data for strengthening enforcement
of e-Way bill system under GST
A. Background
In the 30th GST Council Officers’ Meeting held on 28th Sep.2018, the Union Finance Secretary,
tasked GSTN with studying the RFID based systems in use for vehicle tracking by various State Tax
Departments and to make recommendations on an interoperable system across the country for smooth
sharing of information of E-Way Bills with the State authorities on a real time or near real time basis.
GSTN was further asked to evaluate various challenges and bottlenecks involved in integration of RFID
based vehicle tracking systems with the E-way Bill system and recommend measures so as to move
from current practice of physical verification of every vehicle to interception and verification based on
risk assessment.
2. Another Committee headed by Dr John Joseph, Member CBIC was constituted earlier to come
up with an operational plan for achieving the objective of harmonizing the track and trace efforts of the
different stakeholders. The Committee co-opted NHAI (National Highways Authority of India),
IHMCL (Indian Highways Management Company Limited), NPCI (National Payments Corporation of
India), GSTN, NIC and DMIDC (Delhi–Mumbai Industrial Corridor Project) and has submitted its
report on “Integration of FAST-ag program of NHAI with e-way bill mechanism and integration of
LDB (Logistics Data Bank) program of DMIDC with customs E-seal program of CBIC & FAST-ag
program”. The said report covers in detail the National Electronic Toll Collection (NETC) programs
and use of RFID technology for the same and how the FAST-ag infrastructure of NHAI/NCPI can be
used for e-way bill tracking thus avoiding additional expenses on separate RFID tags and the readers.
The Committee has recommended use of FASTag and sharing of data by NPCI with E-Way Bill system
for which required technical details have also been worked out by the Committee.
3. Dr. John Joseph Committee studied the apparent mutual benefits to Central and State
Governments and the FASTag program that could accrue on account of integration and recommended
that it was logical to adopt the FASTag for the following reasons:
i. FASTag has already touched 25% penetration of toll collection (in value) in just 18 months of
operation and it would be the most preferred way of paying toll in future, especially for the
commercial vehicles.
ii. FASTag infrastructure was already existent at the National Highway toll plazas and soon State
Highways would also be joining the program.
iii. By using FASTag infrastructure, GSTN/DMIDC/State VAT administrations can
a. save the expenses of creating a parallel RFID infrastructure.
b. FASTag data when merged with E-Way Bill data, can be intelligently analysed to
generate alerts for probable violations of GST.
iv. Trade users and suppliers of FASTag programme, will get benefit of
a. tracking the movement of goods, leading to its (FASTag) greater acceptability.
b. Increased average speed of Commercial Vehicles leading to increased productivity.
c. track and trace of the complete supply chain under one ambit which would bring in the
much-required efficiencies in the supply chain.
v. The Central Government would benefit by way of:
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a. Removal of the redundant infrastructure i.e. additional cost and operational
inefficiencies.
b. The analytical reports provided by the LDB system to the customs would aid various
related parties to take informed decisions related to diversions, idle time, etc.
c. Facilitating Government’s ambitious project of integrating the entire supply chain and
providing a holistic picture.
d. further aid in improvement of ease of doing business and improved Logistics
Performance Index (LPI) to a large extent
e. The integration of LDB system with Custom’s E-seal has high level of synergies, as
both the systems are concerned with the movement of Container. Similarly, enhanced
efficiency could be expected by resource sharing between LDB and FASTag
programme.
4. Recommendation of the Committee: The Committee went on to further recommend that
a. It was logical to adopt the FASTag for the integration of the eWay Bill system with it
b. for greater efficiency across the Indian Logistics Industry apart from the DLD’s LDB system,
Custom’s E-Seal System and NHAI’s FASTag to be integrated on one platform, other players
of the logistics ecosystem would also have to be brought on board, viz. the Port (including ICD,
CFS, Air Cargo, etc.) community and FOIS programme of Indian Railways.
c. This proposed integration would have operational and technical challenges which are expected
to be significantly more complex. An Inter-Ministerial Committee (IMC) duly aided by
technical experts would be able to come up with a comprehensive implementable road map.
5. Thus, Dr Joseph Committee had dwelt upon the aspect of benefits of the integration of FASTag
with various Data Bases concerned with tracking and tracing the consignments. Further, as per
paragraph 4 (c) above, GSTN has prepared a report to apprise the GST Council of the technical methods
to be adopted for the gainful use of integrated RFID and eWay bill Data, in view of existing attempts/
work in progress by some of the States of integrating the eWay Bill DB with the RFID systems; and to
seek approval of the Council for the same.
B. Use of RFID Systems by State Tax Administration
6. A study was conducted on States that have already implemented some system of monitoring of
vehicle movement using RFIDs. These States are Uttar Pradesh, Karanataka and Maharashtra. A brief
overview of the systems adopted by them is given below and a summary of the same is enclosed as
Annexure – I to this proposal.
Uttar Pradesh
7. UP GST Department have made it mandatory for all commercial vehicles moving through UP
to sport the RFID tag from 1 Nov. 2018. The Government has mandated use of only those RFID tags
and readers, which follow the prescribed standards of MoRTH, Govt of India. The readers installed by
them is capable of reading details about vehicle from their own validated RFID tags as well as Fast-
tags. However, the converse is not true. The fast-tag readers installed at toll plazas of NHAI cannot
retain the captured details of RFID tags other than Fast-tag.
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7.1. The near real time interception of vehicle by mobile squad takes place on the basis of red-
flagged vehicle number in Mobile Management System (MMS) received through RFID readers. MMS
maintains details of frequent defaulter details with respect to four main parameters viz Vehicle Number;
Transporter Details; Supplier Details and Recipient Details. They maintain this database through direct
input by field officers who intercept vehicles and take action against them. Accordingly, they have red-
flagged vehicles, transporters, suppliers and recipient through their MMS functionality.
7.2. UP State has established a Monitoring Center at the State Commissioner’s office. There are
approx. 150 mobile vans that ply within the State and perform mobile checks on commercial vehicles.
The monitoring center is able to view the location of these mobile patrols on a map that is displayed on
a video wall. Some of the mobile patrol vehicles even have three cameras that are able to view the front,
rear and within the mobile patrol activities, for transparency. The monitoring center can also directly
converse with the mobile patrol.
7.3. When they get the e-way bill information (presently it takes around 4 to 5 days), they view the
additional information with respect to supplier details, recipient details and transporter details
corresponding to that particular vehicle number. Therefore, no real time interception of vehicles on the
basis of red-flagged transporters, recipients and supplier derived from e-way bill system is done now.
However, they are using this information in cross checking return details and accordingly planning raid
on their premises if any anomalies found.
Maharashtra
8. In Maharashtra, 24 Border Check Posts were established in pre-GST era. Even though it was
envisaged as an Integrated Project for Department of Transport, Department of Sales Tax (now,
Department of GST) and Department of State Excise, joined the same. Maharashtra Border Check Posts
Network Limited (MBCPNL), a Special Purpose Vehicle (SPV), was formed to Build, Operate and
Transfer (BOT) 24 modernized and computerized Integrated Border Check Posts. Out of this, 18 Border
Check Posts are functional as on today. RFID readers are installed at all these locations to track
movement of vehicles. RFID tags are provided to all commercial vehicles crossing the Border Check
Posts, free of cost.
8.1. As per the information obtained from MBCPNL, 60% of vehicles crossing the Border Check
Posts are equipped with RFID tags installed on them. MBCPNL, through API, shares RFID data with
E-Way Bill System, as part of the pilot project. As per DDG, NIC, the data is flowing smoothly from
18 Border Check Posts to EWB System from 10-09-2018. NIC integrates RFID data with e-way bill
data. NIC has developed a separate dashboard https://dashboard.ewaybillgst.gov.in/ewb_rfid/ wherein
Reports are currently available under three headings – Summary, RFID Reader and Vehicle.
8.2. In Maharashtra, the current policy is not to have permanent flying squads for interception of
vehicles and inspection of goods, under the e-way bill rules. The emphasis of the State is to use
technology in the most optimal way so that the risks of potential tax evasion can be averted through a
prudent electronic monitoring system.

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Karnataka
9. Commercial Taxes Department, Karnataka with the association of National Informatics Centre,
Bangalore started working on the RFiD technology usage in the road vigilance activities. The aim of
the project was to explore to use the unmanned RFiD readers on the roads to monitor the movement of
the vehicles.
9.1. One year back, the Proof of Concept (PoC) was done for the same by installing the RFiD readers
and antennas at one of the national highways, and capturing the RFID tag details and storing the data at
the central server. This experiment has been done, as there could be some roads where there cannot be
tollbooths or check posts, but still the vehicles movement could be there. This PoC has been done to
find out the challenges in installing and managing the unmanned RFiD readers and antennas.
9.2. Reports being generated or planned for use by tax officers
i. Summary of RFiD data received from different locations for given data range
ii. Details of RFiD received from (vehicles passed at) the selected location for given time
period
iii. Details of the Vehicle passed (RFiD received) at different locations for given dates.
9.3. They also know the directions based on the RFiD installation location.
C. How RFID data could be used by E-Way Bill System
10. Radio Frequency Identification Technology (RFID) based highway toll collection system is
closest example of how RFID data could be used by e-way bill system. RFID based Electronic Toll
Collection (ETC) system has the following components: -
i. RFID tag is mounted on the vehicle’s windscreen.
ii. As the vehicle reaches the toll plaza, a unique identification number that is embedded on
the tag is read by roadside RFID reader.
iii. In one type of system, the amount pre-fed in the tag gets deducted and the boom barrier
opens.
iv. In another case, the unique number of tag is sent to a central computer (RFID Server).
v. Applicable toll amount is deducted from a prepaid account that is linked to that particular
Tag.
10.1. The RFID tag is attached to one vehicle, which has a unique registration number granted by
transport authorities. The e-way bill generated on EWB System has one-to-one relationship with the
Vehicle Registration Number. Thus, there is unique one-to-one relationship between RFID tag, RC
number and EWB number.
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10.2. Thus, getting the unique RFID number from
RFID reader, one can get RC number and EWB
number if RFID number tagged to the vehicle is in the
database of EWB/Consolidated EWB.
10.3. Once RFID number is read at a location, the
details of location, date and time can be tagged with
the reading and the combined data can be used in two
ways:
a. Getting the details of EWB (whether it is valid, invoices attached to
EWB and commodity details of invoice) in near real time and use the same to decide
whether to stop the vehicle for inspection.
b. Take the data and analyse to find out discrepancies/misuse etc.
11. This presents two options for using this data.
Option 1: Offline Operation
12. In this option, the RFID read data would be transferred to e-way bill system, which will
consume this data and generate various reports for the officers of the tax department. The RFID data is
received by NPCI from all toll plazas at frequent intervals. The EWB System can then generate reports,
few indicative ones are given below:
12.1. EWB generated against vehicle but no inter-state movement takes place during the life of the
EWB;
i. EWB generated but while crossing the border, e-way bill validity expired or e -way bill
was cancelled or e-way bill was rejected by Consignees;
ii. Commercial Vehicles crossing the Toll Plaza (border) without EWB;
iii. Vehicle having EWB but crossing border more than once before expiry of validity period
on same EWB.
iv. The EWB rules 138(9) provides that an e-way bill cannot be cancelled if it has been
verified in transit in accordance with the provisions of rule 138B. RFID data may also be
considered as verification of the movement of goods and disallow the cancellation of
EWBs whose movement is ascertained from RFID data received by EWB System.
v. A report of all ODC EWBs which do not register significant weight in the weigh-in-motion
systems, may be generated as many cases of misuse of ODC facility which allows long
travel time.
Option-2: Real Time Operation
13. Under this option, following steps will be taken where a separate team will be located
downstream at a distance of 200 to 300 meters to stop a vehicle, if red flagged by the System:
RFID
•Unique RFID tagged to a vehcile
•RFID no read by Reader
RC No
•Vehicle registration number
•Gets tied to RFID
EWB
•Unique
•Tied to RC number
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A. RFID data will be passed on to a Computer system of GST department kept at the check
post/toll plaza (GSTN/NIC will have to develop a software to take the data from RFID
reader and take following steps. NPCI/NHAI will have to pass on this data to GST’s PC
kept at Toll Plaza. (It will make sense to pay some amount to NPCI to have this software
installed on their computer rather than putting a new computer. The modalities can be
worked out if Government decided to go for this option).
B. The GST Computer will make a call to the EWB Server and ask for validity of EWB and
details of invoices linked to the EWB. (Internet will be required for this purpose).
C. In case EWB is invalid/expired/cancelled, information will be passed on to a team located
200 to 300 meters behind to enable them to stop that vehicle.
D. In case EWB is valid but tagged to sensitive commodity for which decision has been taken
by department to check the vehicle, the information will go to the downstream team.
14. Comparison of both the Options are as follows:
Parameters Option -1 Option -2
Whether vehicle can be stopped and
checked in real time near the toll plaza
where RFID reader is located
No Yes
Availability of checking team at Toll Plaza
to stop the vehicle
Not Required. Analysis
will be done at the
backend and action
initiated based on report.
Required, 200 to 300 mts
downstream as done in case
of over-speed checking by
traffic police.
Retrieval of EWB data from EWB System
based on Vehicle RC number tagged to
RFID in real time
No Yes
Internet connectivity at Toll Plaza Yes Yes
Computer system and software for
retrieving the EWB data from EWB
System
No Yes
Availability of parking space downstream
the toll plaza for stopping the vehicles for
checking
No Yes
Separate IT Infrastructure at EWB System
to handle lakhs of queries coming to it with
vehicle number from toll plaza to retrieve
EWB data
No Yes
D. Recommendation:
15. Upon examination of two options given above, it is recommended that till sufficient
infrastructure is put in place at Toll Plaza and IT infrastructure is installed at EWB system for real time
retrieval of E-Way Bill for Vehicle Movement tracking and monitoring, first option of offline mode of
using data for preparation of various analytical reports for use by the tax official may be adopted. More
analytical reports will be prepared based on requirement of Tax Departments. The readiness of States
to adopt Option-2 may be reviewed from time to time.
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16. Mandatory provisioning of RFID on all Commercial Vehicles: As per Ministry of Highways
and Road Transport Department, all commercial vehicles are supposed to be affixed with an RFID that
conforms to the specifications notified by GoI Gazette notifications dated 02/11/17 and 08/11/17. These
specifications have been termed as FAS-Tag. Government has mandated fitment of FAST-Tag to the
new vehicles sold after 1st December 2017 – GSR 1361 (E).
16.1. It has also been mandated that FAST-Tag is mandatory for obtaining National Permit and proof
of fitment – GSR643 (E). To ensure that commercial vehicles manufactured before 1/12/2017 have
RFID Tags, GST Council may consider making it mandatory under GST Laws.
17. Making FAST-Tag of NHAI/NCPI as the RFID Tag under GST: National Payments
Corporation of India manages retail payments and settlement systems in India and is responsible for
running the National Electronic Toll Collection system in coordination with IHMCL. More than 35 lakh
RFID tags have already been issued and thousands of FASTags are being issued every day. EWB
System may ride on this infrastructure rather than creating new one, which will be expensive and time
taking. FAST-Tag is presently operational at 440 + toll plazas across National Highways, and eventually
would cover all Toll Plazas. These steps will lead to huge jump in the number of vehicles taking FASTag
and thus NPCI should be directed to re-examine the cost of Tags and revise it downwards.
17.1. Use of FASTag will also ensure that all States adopt the same standard and methodology to
ensure complete interoperability. This will ensure that States do not adopt a closed system leading to
disparate systems in the country as then the information flow to a single system for enforcement (e.g.
E Way bill system) would become complex and difficult. (The system adopted by UP is not reverse
compatible with FASTag system).
17.2. Under the proposed system, data will be available centrally, which NIC can push to respective
State/UT/ CBIC officials as per requirement. It would be easier to build and evolve necessary risk
management parameters on common platform as per requirement of respective department of States
and Centre.
18. To check movement of overloaded/oversized vehicles, system of weigh-in-motion is being
gradually adopted instead of weighing vehicle on weigh bridges. NHAI is in the process of setting up
weigh in motion devices at all toll plazas. The information could also be exchanged with NIC/GST
System, as and when it becomes operational as the weight of vehicle could be used as one of the risk
parameters. NHAI/NPCI may be mandated to share this information to enable EWB system to cross
check data entered by taxpayers claiming to be moving over-size vehicle which is given much longer
validity time.
19. It is recommended that at the time of reading at the tolls, the following details would be captured
and provided by NPCI to the EWB system on near real time basis under Option-1:
a. State-code (to be managed at NIC end)
b. Toll-Id
c. FAST-Tag-Id
d. Vehicle no & Class
e. Date and time of reading of FAST-Tag
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f. Direction of travel of the Vehicle
g. Weigh in Motion (WIM) data wherever available.
20. Considering the security aspect, since FASTag is primarily designed for toll collection, which
is financial data and NPCI connects with Member Banks only through Secured Network (NPCINET),
it is recommended that NPCI-NIC-GST System connectivity be established over MPLS leased lines.
This would be provided by NPCI.
21. Accordingly, the recommendations of the report at part D above for Use of Radio-frequency
Identification (RFID) data for strengthening enforcement of e-Way bill system under GST may be
considered and approved before implementation.

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Annexure 1
Uttar Pradesh. Maharashtra Karnataka
a. 41 RFID readers installed in the
State can read FASTag data as
well as their own RFID issued and
implemented by TEKSON.
b. So far 0.05 lakh RFIDs @
Rs.100/- per RFID have been
distributed across the State.
c. RFID reader captures mainly three
details – vehicle number, time,
location and integrates the data in
the Mobile Management System
of U.P. Government.
d. The Mobile Management System
contains details of frequent
defaulters based on vehicle
number, transporter details,
supplier details and recipient
details.
e. RFID and MMS data are proposed
to be used to throw up the
instances where intervention
would be required by the Mobile
Squad.
f. As many as 150 mobile vans have
been put on the road which are
monitoring centrally and have
necessary equipment fitted into it.
Current Status: There is a time gap
of 4-5 days in getting eWB data and
hence using it for risk profiling of
entities based on RFID and eWB
data comparison.

Limitation: Inter-operability-
RFID readers installed can read and
retain FAST-ag data but not vice-
versa
Advantage: Real time enforcement
intervention planned.
a. An integrated project for
Department of Transport,
Department of Sales Tax and
Department of State Excise jointly
known as Maharashtra Border
Check Posts Network Limited
(MBCPNL) had been envisaged
through a Special Purpose Vehicle
to build and operate 24 modernized
and integrated border check posts.
b. 18 out of 24 border check posts are
functional which capture data out
of RFIDs distributed free of cost.
c. As per the data, 60% of the
vehicles are equipped with RFID
tags and MPCPNL shared data
through API with EWB system run
by NIC as part of pilot project.
d. NIC has developed three reports –
Summary, RFID reader and
vehicle on the dash board
ewbill.gst.gov.in/ewb_rfid.

Current Status: The State has no
permanent flying squads and
emphasizes on use of technology in
optimal way for risk profiling of
entities.

Limitation: Real time enforcement
intervention not planned.
Advantage: Data can be used for
passive risk profiling of entities
based on EWB data
a. Proof of Concept (PoC) was
initiated a year back for capturing
data on one national highway and
storing the data at a central server
with an aim to explore use of
unmanned RFID reader to monitor
movement of vehicles,
b. Project focused on the roads
where there were no toll booths or
check posts, but still the vehicle
movement was there. The focus of
the first PoC was to find out the
challenges in installing and
managing unmanned RFID
readers and antennae. The PoC
has now been extended to four
strategic locations as part of pilot
project.
c. Karnataka Tax Department is
trying to explore all types of RFID
data including FASTag.
d. Reports are being generated for
the use of the officers such as
details of vehicles passed through
reader, for a given data range.
Current Status: Pilot project
having been completed now, the
API integration with the central
server from these locations to
central server is underway which
would take three to four weeks’
time.
Limitation: Real time enforcement
intervention not planned as of yet.
Advantage: Data can be used for
passive risk profiling of entities
based on eWB data as well as the
system can be upgraded for real time
intervention


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Agenda Item 10: Quarterly Report of the NAA (National Anti-profiteering Authority) for the
quarter October to December 2018 for the information of the GST Council
The NAA (National Anti-profiteering Authority) had been constituted as per the provisions of
Section 171 of the CGST Act 2017. Rule 127(iv) of the CGST Rules 2017 further mandates the NAA
to furnish a performance report to the Council by the 10th day after the close of each quarter.
2. The NAA has forwarded Performance Report for the quarter ending 31.12.2018. The salient
features of the report are as under:
2.1 During the period from 01.10.2018 to 31.12.2018, 41 investigation reports were received by
the NAA from the Directorate General of Anti-Profiteering (DGAP) while they already had 29
investigation reports pending as on 30.09.2018 forwarded by the DGAP (Annexure 1).
2.2. During this period, out of these 70 investigation reports, NAA has passed Orders in 20 cases
which were all unanimous. The summary of orders is as follows:
(a) Profiteering was established in 6 cases involving anti-profiteering amount of Rs.
542.59 crore. Major among these were the cases of M/s Hindustan Unilever Limited
and M/s Hardcastle Restaurants Private Limited involving profiteering amount of Rs.
534.89 crore and Rs. 7.59 crore respectively;
(b) Profiteering was not established in 14 cases.
2.3 Thus, as on 01.01.2019, 37 investigation reports were pending disposal with the NAA while 13
cases were referred back to the DGAP for further investigation.
2.4 In addition, NAA also organized 3 Zonal meetings on Anti-profiteering at Varanasi (23rd
November, 2018), Cochin (21-22 December, 2018) and Mumbai (28th December, 2018) all headed by
the Chairman wherein the Central and State GST officers were present.
2.4 Also interactive sessions on GST Anti-profiteering was organized at Mumbai by CII
(Confederation of Indian Industry) on 4th October, 2018. Further, 15th Annual India Tax Workshop was
organized by CII at Goa on 24 – 25 October, 2018 which was attended by the Chairman, NAA.
2.5 As regards receipt of complaints at NAA, a total of 156 complaints were received with details
as under:
NAA Portal 83
Email 44
Physical (by post) 13
Local Circle (An online portal for complaints and other consumer
issues)
16
2.6. These complaints were forwarded to the respective Screening Committee/ Standing Committee
where allegation of profiteering was there. The complaints relating to enforcement issue and where
allegation related to tax-evasion etc., were forwarded to the respective Chief Commissioners for
necessary action.
3. The Quarterly Report of the NAA for the quarter October to December 2018 is placed before
the Council for the information.

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Annexure 1
QUARTERLY PERFORMANCE REPORT OF NATIONAL ANTI-PROFITEERING
AUTHORITY

Quarter from: 1st October to 31st
December 2018
S.
No.
Opening
Balance
No. of
Investigation
Reports
received from
DGAP during
the quarter
Disposal of cases (During the quarter)
Closing
Balance
Total
Disposal
during
quarter
No. of cases
where
profiteering
established
No. of cases
where
profiteering
not
established
No. of
cases
referred
back to
DGAP
1 29 41 33 6 14 13 37
2. The details of the 20 Orders passed by the Authority during the quarter October to December
2018 are as under: -
Sr. No. Notice Date of order Amount of
Profiteering (Rs. in
lakh)
1. Hindustan Unilever Ltd 24.12.2018 53489.00
2. Hardcastle Restaurants Pvt Ltd 16.11.2018 759.37
3. JP & Sons 6.12.2018 5.01
4. Theco India 30.11.2018 4.78
5. Kunj Lub Marketing 08.10.2018 0.90
6. Harish Bakers & Confectioners 07.12.2018 0.15
7. Amway India 29.10.2018 NIL
8. Yum Restaurants (KFC) 29.10.2018 NIL
9. Fabindia Overseas 16.11.2018 NIL
10. Landmark Auto 17.12.2018 NIL
11. Zeba Industries 17.12.2018 NIL
12. AGL Tiles 24.12.2018 NIL
13. PEPS Industries 24.12.2018 NIL
14. Panasonic 24.12.2018 NIL
15. Impact Clothing 24.12.2018 NIL
16. Jansons India 27.12.2018 NIL
17. Raj & Co., 27.12.2018 NIL
18. Lorenzo Vitrified Tiles 27.12.2018 NIL
19. Ahuja Radios 27.12.2018 NIL
20. Asian Paints 27.12.2018 NIL

3. Total 37 investigation reports are pending disposal with the NAA.
Detailed Agenda Note Volume 1 Agenda for 32nd GSTCM



Confidential





Agenda for
32nd GST Council Meeting

10 January 2019

Volume – 2

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File No: 01/32nd GSTCM/GSTC/2019
GST Council Secretariat

Room No.275, North Block, New Delhi
Dated: 01 January 2019

Notice for the 32nd Meeting of the GST Council scheduled on 10 January 2019
The undersigned is directed to refer to the subject cited above and to say that the 32nd meeting of the
GST Council will be held on 10th January 2019 (Thursday) at Main Committee Hall, Parliament House
Annexe, New Delhi*. The schedule of the meeting is as follows:
• Thursday, 10th January 2019: 10:30 AM to 01:30 PM
2. In addition, an Officer’s Meeting will be held on 09th January 2019 at the same venue as per
following schedule:
• Wednesday, 09th January 2019: 10:30 AM to 04:30 PM
3. The Agenda Items for the 32nd Meeting of the GST Council will be communicated in due course
of time.
4. Please convey the invitation to the Hon’ble Members of the GST Council to attend the meeting.

-Sd-
(Dr. Ajay Bhushan Pandey)
Secretary to the Govt. of India and ex-officio Secretary to the GST Council
Tel: 011 23092653
Copy to:
1. PS to the Hon’ble Minister of Finance, Government of India, North Block, New Delhi with the request
to brief Hon’ble Minister about the above said meeting.
2. PS to Hon’ble Minister of State (Finance), Government of India, North Block, New Delhi with the
request to brief Hon’ble Minister about the above said meeting.
3. The Chief Secretaries of all the State Governments, Delhi and Puducherry with the request to intimate
the Minister in charge of Finance/Taxation or any other Minister nominated by the State Government
as a Member of the GST Council about the above said meeting.
4. Chairperson, CBIC, North Block, New Delhi, as a permanent invitee to the proceedings of the
Council.
5. Chairman, GST Network
* Note - The Venue of the Meeting was changed to Hall No 2-3, Vigyan Bhawan, New Delhi on both
days, as communicated by email on 03.01.2019.

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Agenda Items for the 32nd Meeting of the GST Council on 10th January 2019
1. Confirmation of the Minutes of 31st GST Council Meeting held on 22nd December, 2018
2. Deemed ratification by the GST Council of Notifications, Circulars and Orders issued by the
Central Government
3. Decisions of the GST Implementation Committee (GIC) 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 and 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 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
iv. Proposal for amendment in CGST Rules, 2017
7. Review of Revenue position
8. Allowing ITGRC (IT Grievance Redressal Committee) to consider non-technical issues (errors
apparent on the face of record)
9. Use of RFID (Radio-frequency Identification) data for strengthening enforcement of e-Way bill
system under GST
10. Quarterly Report of the NAA (National Anti-profiteering Authority) for the quarter October to
December 2018 for the information of the GST Council
11. Report of GoM on Revenue Mobilisation
12. Any other agenda item with the permission of the Chairperson
13. Date of the next meeting of the GST Council
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TABLE OF CONTENTS
Agenda
No.
Agenda Item Page No.
4 Interim Report of GoM (Group of Minister) on MSMEs 6
11 Report of GoM on Revenue Mobilisation
24
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Discussion on Agenda Items
Agenda Item 4: Interim Report of GoM (Group of Minister) for MSMEs
In pursuance of the decisions of the GST Council taken in 29th Meeting held on 04th August
2018, the GoM for MSME was constituted on 14th August 2018 by the GST Council to make
recommendations to the Council to address the concerns of Micro, Small and Medium Enterprises
(MSME).
2. The GoM for MSME met on 6th January 2019 to discuss the issues referred by the GST Council
in its 31st Meeting held on 22nd December 2018. Prior to that, as directed by the GST Council, the agenda
items were discussed in the joint Meeting of the Law Committee and the Fitment Committee on 4th
January 2019. The recommendations of the joint committee of the Law and Fitment was discussed by
the GoM on 6th January 2019.
3. The issues discussed by the GoM and the recommendation made are in Table 1 below:
Table 1
Sl. No Agenda Note Recommendation of the GoM
1 Increase of limit of
turnover for
composition scheme to
Rs. 1.5 crore with
effect from 01st April
2019
The GoM recommended to increase the limit of annual turnover
for composition scheme to Rs 1.5 crore with effect from 01st April
2019.
2 Simplification under
composition scheme by
way of quarterly
payment with annual
return.
The GoM recommended to simplify composition scheme by
providing for quarterly payment of tax (along with suitable
declaration statement) and filing of annual return.
3 Increasing exemption
threshold for the
suppliers of goods.
Following recommendations were made by GoM after due
deliberation:
i. The annual turnover threshold limit for payment of tax for
supplier of goods needs to be raised; however, the final
decision on new threshold, raising it from Rs 20 lakh to a
level upto Rs 75 lakh, may be taken by the GST Council.
ii. The threshold limit for goods should be raised and not for
services as considerable base of service providers is at
lower level of turnover. The concerns of compliance for
small service providers is proposed to be addressed
through a composition scheme separately being
recommended.
iii. Operational details for differential threshold limits for
goods and services to be worked out by the Law
Committee.
iv. Till amendment in law is made to give effect to this
change, the scheme may be made operational by notifying
exemptions from tax as well as exemption from
registration.
v. The scheme may be made operational from the 1st of April,
2019.
vi. For Special Category States, view may be taken in the
Council after due consultation with these States.
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4 Composition scheme
for small service
providers
Following recommendations were made by GoM after due
deliberation:
(i) There should be a composition scheme made available
for services with a tax rate of 5% (2.5% CGST +2.5%
SGST), to be applicable to service providers upto an
annual turnover of Rs 50 lakhs.
(ii) The scheme shall be available to both service providers
as well suppliers of goods and services, who are not
eligible for the presently available composition scheme
for goods.
(iii) Till amendment in law is made, the scheme has to be
made operational by notifying a rate of 5% without input
tax credit as has been done in the case of restaurants.
(iv) The scheme may be made operational from the 1st of
April, 2019.
5 Provision of free
Accounting and Billing
Software to small
taxpayers by GSTN
(i) The GoM recommended that the software may be rolled
out in a staggered manner, State-wise, similar to e-Way
Bill.
(ii) Planned rollout may be made from the first week of
February, 2019.

4. The record of discussion of the Meeting of GoM for MSME dated 6th January 2019 is at
Annexure 1.
5. The recommendations made by the joint meeting of the Law Committee and Fitment Committee
for deliberation by the GoM for MSME is at Annexure 2.
6. The recommendations of the GoM for MSME along with Annexure 1 and Annexure 2 are
placed before the Council for consideration and decision.

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Annexure 1
Record of discussion of the Meeting of the GoM for MSME held on 06th January 2019
The Group of Ministers (GoM) for MSME met on 6th of January, 2019 at 3:30 PM in Kalpavriksha,
North Block, Ministry of Finance, New Delhi. The meeting was chaired by Shri Shiv Pratap Shukla,
Hon’ble Minister of State (Finance), Government of India and Convenor, GoM for MSME. The meeting
was attended by Shri Sushil Kumar Modi, Hon’ble Deputy Chief Minister of Bihar, Shri Manish Sisodia,
Hon’ble Deputy Chief Minister of Delhi and Dr. T. M. Thomas Isaac, Hon’ble Finance Minister of
Kerala.
2. The meeting began with the welcome address of Shri Shiv Pratap Shukla, Convenor, GoM for
MSME. He highlighted the challenges being faced by the MSME sector and the need to support the
small businesses to grow in size than to constrict them with excessive compliance of GST. He thereafter
directed Member Secretary, GoM for MSME to present the agendas to be taken up the GoM.
3. The following agendas were presented before the GoM for deliberation and to make
recommendation to the GST Council and the discussion and decision hereon is recorded in the
subsequent paragraphs.
I. Increase of limit of turnover for composition scheme to Rs. 1.5 crore with effect from.
01st April 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.
4. Agenda I: Increase of limit of turnover for composition scheme to Rs. 1.5 crore with effect
from 01st April 2019.
4.1 At the outset, it was highlighted that the GST Council in its 23rd Meeting held on 10th
November, 2017, had already taken a decision to increase the eligibility for composition upto annual
turnover of Rs.1.5 crore. It was informed that accordingly, the CGST Act, 2017 had been amended and
would become effective from 1st Feb, 2019. However, the same would need to be notified by the
Government. It was also informed that in the joint meeting of the Law Committee and the Fitment
Committee held on 04th January 2019, it was proposed that the aforesaid decision to raise the eligibility
for the composition scheme for goods may be given effect from 1st of April, 2019 i.e. from the beginning
of a new quarter. Further, it was highlighted that the decision would be a relief to the manufacturers
who, during pre-GST period, were exempted from payment of Central Excise duty upto annual turnover
of Rs 1.5 crore in the preceding year. The revenue implication of this decision for all taxes put together
was likely to be approximately Rs 65 crore per month i.e. Rs.780 crore in a year.
4.2 Recommendation of GoM: The GoM recommended to increase the limit of annual
turnover for composition scheme to Rs 1.5 crore with effect from 1st April 2019.
5. Agenda II: Simplification under composition scheme by way of quarterly payment with
annual return.
5.1 In the joint meeting of the Law Committee and the Fitment Committee held on 04th January
2019, it was proposed that the taxpayers under composition scheme may be allowed to pay tax on
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quarterly basis and file annual returns with quarterly payment along with declaration /statements. It was
suggested that payment declaration should be designed with details necessary for compliance
verification. Also, the annual GSTR-4 would need to be suitably amended to this effect.
5.2 Recommendation of GoM: The GoM recommended to simplify composition scheme by
providing for quarterly payment of tax (along with suitable declaration statement) and filing of
annual return.
6. Agenda III: Increasing exemption threshold for the suppliers of goods.
6.1 The Secretary to GoM recalled that the GST Council in its 31st Meeting held on 22nd December,
2018 had decided to refer the issue of increasing the threshold exemption limit for suppliers of goods
(manufacturers and traders) to the GoM for MSME for consideration and make suitable recommendation
to the Council. This issue was deliberated upon in the joint meeting of the Law Committee and the
Fitment Committee on 04th January 2019. The joint committee felt that increasing the threshold limit to
Rs 75 lakh was not desirable considering the revenue implication and proposed the following
alternatives:
i. To raise the threshold exemption for goods to Rs 40 lakhs; or
ii. To raise the threshold exemption uniformly for goods and services to Rs 40 lakhs;
iii. Though the preliminary view was to raise the limit to Rs 20 lakhs for Special Category States,
separate decision needed to be taken for Special Category States after discussion with them.
Discussion:
6.2 GOM discussed the issue of raising threshold in detail taking into consideration the revenue
implication of the decision. The discussion noted that the present turnover threshold of Rs 20 lakhs was
very low for goods and there was a consensus that there was a need to raise the limit. Three possible
thresholds were discussed, namely annual turnover upto Rs 40 lakh, Rs 50 lakh and Rs 60 lakh. The
following advantages and disadvantages were noted in relation to raising the annual turnover threshold
for registration: –
6.2.1 Merits of raising threshold –
i. 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 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;
ii. Buoyancy of reporting in the economy: The taxpayers who are showing lower turnover
at present may be induced to show an increase in turnover as there is crowding of
reporting around the threshold;
iii. Limited to intra-State B2C: The benefit of increased threshold shall be availed by
taxpayers doing B2C transactions within the State and therefore the revenue implication
would not be much.
iv. Better administration: It is a settled principle in VAT that the threshold should be high
so that tax administration does not waste energy on non-productive taxpayers.
6.2.2 Demerits of raising threshold:
i. Loss of revenue: Higher threshold would lead to loss of revenue and also loss of data
relating to economic activity.
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ii. Splitting: Higher threshold offers higher opportunity to suppress the threshold by
splitting.
iii. B2C reporting reduction: There would be a tendency to under-report B2C supplies as
considerable economic activity can take place below the threshold.
6.2.3 The revenue loss due to raising of the threshold for goods was noted from the following table -

6.3 Various views were expressed during the discussion on the agenda. Three different streams of
opinions were expressed.
6.4 A view was expressed that increasing the exemption limit was against the principle of GST of
having wide tax base. It was further brought to fore that reducing the GST rate as well as GST base at
the same time would not be conducive for the GST revenue. Furthermore, the exemption limit during
the VAT regime in most of the States was even lower at Rs 10 lakh which had been increased to Rs 20
lakh in the GST regime and it was suggested that GST should be given time to stabilize. The tendency
of businesses to split before hitting the threshold limit was also pointed out. A supporting view was that
the compliance burden on the composition taxpayers would be drastically reduced in light of the
proposal recommended earlier and the existing taxpayers may opt for the same.
6.5 Another view emerged that although the proposal would be highly beneficial to economically
developed centres of the country, it would be rather skewed for those States where majority of the
taxpayers came below the raised threshold limits. It was suggested that State-wise data of taxpayers who
would become eligible to avail the benefit along with revenue implication may be presented before the
GST Council to take an informed decision. The information loss about economic activity that would be
coupled with the proposal also got discussed as an area of concern. After taking into consideration the
revenue losses at various thresholds, there was a view expressed that the threshold should be at present
raised to Rs 40 to 50 lakh.
6.6 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,
Threshold
limit
increased
for dealer
of goods
to
Revenue
foregone
from
composition
taxpayers (Rs
crore)
No of
existing
composition
taxpayers
getting
relief
Revenue
foregone from
regular
taxpayers (Rs
crore)
No of regular
taxpayers getting
relief (excluding
nil filers)
Total
revenue
(Rs
crore)
Total
Number
[taken as 50% of
revenue]
[taken as 50% 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 3,95,000 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
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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.
6.7. The GoM did not support the idea of raising the threshold limit for services along with goods
as it could lead to considerable loss of revenue on the services side as seen from the table below.
Turnover
upto
No of
taxpayers
Total
turnover
Total tax
payable
Tax paid in
cash
Effective
tax rate
(%)
Cash tax/
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
6.8. Recommendation of GoM: Following recommendations were made by GoM after due
deliberation:
(i) The annual turnover threshold limit for payment of tax for supplier of goods
needs to be raised; however, the final decision on new threshold, raising it from
Rs 20 lakh to a level upto Rs 75 lakh, may be taken by the GST Council.
(ii) The threshold limit for goods should be raised and not for services as
considerable base of service providers is at lower level of turnover. The
concerns of compliance for small service providers is proposed to be addressed
through a composition scheme separately being recommended.
(iii) Operational details for differential threshold limits for goods and services to be
worked out by the Law Committee.
(iv) Till amendment in law is made to give effect to this change, the scheme may
be made operational by notifying exemptions from tax as well as exemption
from registration.
(v) The scheme may be made operational from the 1st of April, 2019.
(vi) For Special Category States, view may be taken in the Council after due
consultation with these States.

7. Agenda IV: Composition scheme for small service providers
7.1 In the joint meeting of the Law Committee and the Fitment Committee on 04th January 2019, it
was proposed to introduce a composition scheme for services upto an annual turnover of Rs 50 lakh
with tax rate of 8% (4% CGST+4% SGST), keeping the registration threshold for services unchanged.
7.2 The GoM discussed the need for a composition scheme for small service providers and took
note of the fact that a simple composition scheme is needed for the services sector as these are often
localized B2C service providers such as beauty parlour, dry cleaner, painter, household equipment
maintainer etc. Even the professional service providers, having low turnover, needed to have a more
moderate tax rate than the present rate of 18% tax with input tax credit.
7.3 The GoM noted that the tax rate of 8% was still high in services such as restaurant, a rate of 5%
had been prescribed. As far as revenue loss due to a rate of 5% is concerned, it was noted that a very
Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 12 of 27
large number of these service providers are works contractor who would like to remain in the input tax
credit chain. Similarly, professional service providers etc., like architect, chartered engineers and
consultants are also likely to remain in the input tax credit chain. Therefore, the revenue loss would be
less than Rs 5000 crore annually, if a composition scheme at 5% is provided to the service providers
and more than 50% of taxpayers stay in the input tax credit chain.
7.4 It was brought to notice that for implementation of composition scheme for services, amendment
in law would be needed 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, and to keep the legal complexity at bay,
it was suggested that composition scheme for services would be available as a residual scheme to every
registered person, to whom composition scheme for goods is not available.
7.5 Recommendation of GoM: Following recommendations were made by GoM after due
deliberation:
(i) There should be a composition scheme made available for services with a tax rate of 5% (2.5%
CGST +2.5% SGST), to be applicable to service providers upto an annual turnover of Rs 50 lakhs.
(ii) The scheme shall be available to both service providers as well suppliers of goods and services,
who are not eligible for the presently available composition scheme for goods.
(iii) Till amendment in law is made, the scheme has to be made operational by notifying a rate of
5% without input tax credit as has been done in the case of restaurants.
(iv) The scheme may be made operational from the 1st of April, 2019.
8. Agenda V: Provision of free Accounting and Billing Software to small taxpayers by GSTN.
8.1 The above issue was brought by GSTN and was discussed in the joint meeting of the Law
Committee and the Fitment Committee on 04.01.2019 and was agreed upon.
8.2 The features of the software under development was explained to the GoM as below:
i. Product with all features is offered free of cost to small tax payers.
ii. No liability of GSTN.
iii. Allow portability of data from one product to another.
iv. Allow purging of data, if tax payer demands.
v. Product may have Silver/Gold/Platinum packages which can be costed, but basic version
remains free.
vi. Provision not to misuse tax payers’ data
vii. Auto preparation of the relevant return would be done by the software viz GSTR 1 or 3B, 4,
9 etc.
viii. Business will also get inventory management, Profit & Loss accounting, balance sheet
preparation, income tax calculation, etc as basic features (free)
ix. Easy to use software – both cloud and on-premise options available.

8.3 Recommendation of GoM:
i. The GoM recommended that the software may be rolled out in a staggered manner, State-wise,
similar to e-Way Bill.
ii. Planned rollout may be made from the first week of February, 2019.

9. The meeting of GoM for MSME ended with vote of thanks.

Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 13 of 27
Annexure 2
Recommendation made in the joint meeting of Law Committee and Fitment Committee for
deliberation by GoM for Micro, Small and Medium Enterprises (MSME)
It is submitted that the following four proposals were discussed by the Law Committee and Fitment
Committee in its joint meeting held on 04.01.19: -
I. Increase of limit of annual aggregate turnover for availment of composition scheme to Rs. 1.5
crore with effect from 01.04.2019 and simplification of compliance for such taxpayers by way
of quarterly payment with annual return;
II. Increasing threshold exemption for suppliers of goods (manufacturers and traders of goods not
engaged in provision of services);
III. Composition scheme for small service providers (i.e. those who are not presently eligible for
composition scheme); and
IV. Provision of free Accounting and Billing Software to small taxpayers.
2. The detailed agenda along with the decision taken in the said joint meeting are discussed in the
below paras.
3. Increase of limit of annual aggregate turnover for availment of composition scheme to Rs. 1.5
crore with effect from 01.04.2019 and simplification of compliance for such taxpayers by way of
quarterly payment with annual return
3.1 GST Council in its 23rd meeting held on 10th November, 2018 in regard to threshold limit of
aggregate turnover for availing composition scheme, has decided the following: -

“66. For agenda item 9, the Council approved the following:
i. …..
ii. …..
iii. Annual turnover eligibility for composition scheme shall be increased to Rs.2 crore from the present
limit of Rs. l crore by changing the law. Thereafter, eligibility for composition shall be increased to
Rs.1.5 crore per annum.
iv. …..
v. The changes recommended by GST Council at (iii) above to be implemented only after the necessary
amendment of the CGST Act and SGST Acts.”

3.2. It is submitted that amendment of the CGST Act, 2017 was carried out vide ‘The CGST
(Amendment) Act, 2018’ as per the approval granted by GST Council in its 28th meeting held on
21.07.2018. The same will be brought into force from 01.02.2019. The relevant amendment with respect
to increasing the aggregate turnover for the composition scheme is as follows: -

“5. In section 10 of the principal Act,—
(a) in sub-section (1) —
(i) ……
(ii) in the proviso, for the words “one crore rupees”, the words “one crore and fifty lakh rupees” shall
be substituted;”

Hence, on enforcement of the said amendment Act w.e.f. 01.02.2019, proviso of the Section 10(1) of
the CGST Act, 2017 will read as follows: -
Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 14 of 27
“Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such
higher amount, not exceeding one crore and fifty lakh rupees, as may be recommended by the Council.”

3.3 As per the data provided by GSTN (enclosed as Annexure A), the total tax payable from April,
2018 to September, 2018 by 16,22,529 taxpayers availing composition scheme was Rs. 1211.76 crore
(including cess). On extrapolation of the same, the amount of tax payable for the financial year 2018-
19 by such taxpayers would be around Rs. 2423 crore. It is further submitted that for the period April,
2018 to September, 2018, total number of regular taxpayers with aggregate turnover between Rs. 1 crore
and Rs. 1.5 crore was 4,56,516 i.e. 5.23% of total taxpayers and tax payable by them was Rs. 34,815.16
crore i.e. 1.97% of the total revenue out of which Rs. 6,697 crore was paid in cash which works out to
around 20% of the total liability. On extrapolation of the same for the financial year, the amount of
tax payable by such taxpayers would be around Rs. 69,630 crore (20% of this would be Rs. 13,926
crores). It is also submitted that these taxpayers would become eligible for opting for composition
scheme but all of them may not opt for this scheme. Generally, those taxpayers opt for Composition
Scheme who make B2C supply and therefore revenue implication may not be much.

3.4 In view of the above and in order to implement the decision of GST Council, following two
issues were deliberated in the joint meeting of the Law Committee and the Fitment Committee held on
04.01.19: -

(i) To consider the proposal to increase the threshold limit of annual aggregate turnover to Rs. 1.5
crore for availing composition scheme and to decide the limit of the same for Special Category States.

(ii) To consider the following simplification of compliance for taxpayers under the composition
scheme: -

“Taxpayers opting for composition scheme may be required to pay tax on quarterly basis. A challan may
be devised which may incorporate details which are crucial for the tax authorities to ensure compliance
from such taxpayers. Further, they may be required to furnish return only on annual basis.”

3.5 The issue was discussed in the said joint meeting and the following recommendations were
made: -
(i) Proposal in paragraph 3.4(i) above (i.e. raising the annual turnover limit to Rs.1.5 crore) has
already been recommended by the Council in its 23rd meeting. This may be implemented with
effect from 01st April, 2019. The limit for Special Category States, currently with a lower
composition threshold of Rs.75/50 lakh to be discussed separately with them.

(ii) The proposal at paragraph 3.4 (ii) above (i.e. filing of annual returns with quarterly payment
along with declaration/statements) was also agreed and GSTR-4 may be suitably amended to
this effect. This proposal would require amendment to the GST Law and the IT system.

4. Increasing threshold exemption for suppliers of goods (manufacturers and traders of
goods not engaged in provision of services)
4.1 Present Position: In GST, the annual turnover threshold limit is Rs 20 lakh. For Special Category
States it is Rs 10 lakh (except Jammu & Kashmir and after law amendments in six more Special Category
States, namely Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand).
Thus, only four Special Category States, namely Manipur, Mizoram, Nagaland and Tripura would have
Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 15 of 27
threshold limit of Rs. 10 lakh. Any registered person above this annual threshold is required to take
registration in GST. A person making inter-State sale, or making sale through e-Commerce is required
to take registration even if his turnover is below the threshold limit. A composition scheme is available
to supplier of goods (manufacturers and traders) having turnover of Rs 1 crore in a year. This limit is
proposed to be increased to Rs 1.5 crore with effect from 01.04.2019 as per paragraph 3.5(i) above. It
has been argued that MSME manufacturers having turnover of less than Rs 1.5 crore per annum were
not required to take registration in Central Excise. This was an optional scheme. Therefore, only those
manufacturers (below this threshold) took registration who were doing B2B business. MSME sector has
been arguing that in GST, their compliance burden and tax incidence has increased significantly and that
compliance cost is not commensurate with the tax that they pay, and hence a case has been made out for
giving relief to these small taxpayers.
4.2 Proposal for manufacturers and traders (‘supplier of goods’ for short) put before the joint
committee: There appears a strong case for increasing annual threshold from existing Rs.20 lakh to Rs.
75 lakh for supplier of goods. This proposal was also placed before the GST Council in its 31st Meeting
held on 22nd December, 2018. In this meeting, it was a unanimous view that threshold needed a review.
However, it was felt that the new threshold limit may be arrived at after due deliberations. The Council
desired that GOM on MSME may examine this matter and make recommendations to the Council.
4.3 Estimated revenue implication: It is noticed that with increase in threshold for supplier of
goods, the composition taxpayers falling under revised threshold would also get exempted from payment
of taxes. Further, certain regular taxpayers may also opt for threshold exemption. The revenue
implication has been worked out on the assumption that 50% of regular taxpayers will opt for threshold
exemption and the same is indicated in Table below:
TABLE
[Revenue in Rs crore]
Threshold
limit
increased
to
Revenue
foregone
from
composition
taxpayers
(Rs crore)
No of existing
composition
taxpayers
getting relief
Revenue
foregone
from
regular
taxpayers
(Rs crore)
No of regular
taxpayers
getting relief
(excluding nil
filers)
Total
revenue
Total Number
[taken as
50% of
revenue]
[taken as 50%
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
30 lakh 1,250 12,50,000 2,550 6,44,000 3,800 18,94,000
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
60 lakh 2,300 14,30,000 5,300 8,52,000 7,600 22,82,000
75 lakh 2,600 14,63,000 6,600 9,18,000 9,200 23,81,000
For Special Category States, most of the tax base is small. Hence any significant increase in threshold
will wipe out their tax base. Accordingly, the threshold for these States may remain the same.
4.4 The issue was discussed in the said joint meeting and the following was discussed: -
Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 16 of 27
a) The Committee has been asked by the GST Council, in its 31st Meeting, to examine the proposal
to increase the threshold. A majority of the members saw merit in the proposal to raise the threshold
limit. Some of the merits advanced in favour of the proposal are as follows:
1) In the GST regime the compliance cost (including large payouts to various compliance
professionals) of the small taxpayers has increased while the revenue earned from these
taxpayers is not commensurate with the effort or the compliance burden;
2) The numbers suggest that upto an annual turnover of Rs.60 lakh the average tax payment per
month is about Rs.5000/- and 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;
3) The taxpayers who are showing lower turnover at present may be induced to show an increase
in turnover as even upon increase in turnover, they would become eligible to exemption from
registration on account of the raised threshold;
4) The benefit of increased threshold shall be availed by those taxpayers who are generally doing
B2C transactions within the State and therefore the revenue implication would be lower.

b) A separate view may be taken from the remaining four Special Category States as well as all the States
because the proportion of the number of small taxpayers and revenue therefrom is different in different
States.
4.5 In view of the above, an alternative view that emerged was that the threshold limit for supplier
of goods registration for States (excluding Special Category States) may be raised to an annual turnover
of Rs.40 lakh and for the remaining four special category States currently at the lower threshold of Rs.10
lakh, the annual turnover limit may be raised to Rs.20 lakh.
4.6 It was also felt that in respect of taxpayers above this threshold, but between a certain range of
turnover, may be required to pay a fixed sum (or a slab of flat taxes) with a one-line self-declaration
which may be taken on an annual basis.

4.7 The Committee also felt that the following are the relevant factors for taking the decision:
1) the value of turnover of goods in the respective turnover slabs, in addition to the number of
taxpayers and the total revenue involved;
2) the number of exclusions and/or exemptions should be minimal so that tracking of transactions in
the value chain is ensured to a great extent;
3) the increase in threshold limit may lead to a tendency of non-declaration of B2C supplies thereby
leading to further erosion of the tax base;
4) the compliance burden is likely to come down substantially once the benefit of quarterly returns
is extended to taxpayers with a turnover less than Rs.5 crore (which covers around 93% of the
total taxpayer base);
5) the increase in threshold may lead to decrease in direct tax collections;
6) too many changes may not be carried out at this stage and GST should be allowed to settle down;
7) increase in threshold may lead to further splitting of units;
8) threshold limit should be common for suppliers of goods and services;
9) since the constitution of taxpayers may vary from State to State, it will be better if the view of all
the States is taken in the Officers’ meeting and the Council before a final view is taken in the
matter.
10) The above proposal requires amendment to the GST Law and the IT system
Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 17 of 27
4.8 The GoM may take a final view in the matter as regards to the extent of increase in threshold
limit.
5. Composition Scheme for small service providers (i.e. those who are not presently eligible
for composition scheme): -
5.1. In case of services, the existing threshold of Rs 20 lakh (Rs. 10 lakh in Special Category States
as stated above) appears grossly inadequate considering that even a small service provider like tutor,
photographer, drycleaner, mechanic, painter etc. cross this turnover even though their net profit may be
quite low as services also entail significant input costs. However, a very large base of services consist
of taxpayers having small turnover. In service tax, the threshold limit was Rs. 10 lakh. Therefore,
increasing threshold limit to Rs. 50 lakh for services may not be feasible at this stage (though desirable).
It is proposed that for services, a composition scheme may be prescribed for small taxpayers whose
turnover was upto Rs 50 lakh in the preceding year. Keeping in view that services has significant value
addition (unlike goods), the composition rate may be prescribed as 5%. This would reduce compliance
burden on a very large number of taxpayers while being revenue neutral at the same time. The revenue
implication has been worked out considering that a large number of taxpayers are already paying GST
even though their turnover is below Rs 20 lakh and they would continue to pay taxes under the regular
regime even after benefit of composition scheme is extended. Therefore, revenue loss is likely to be less
on account of composition scheme. Accordingly, revenue loss has been computed assuming 50% of
existing taxpayers will avail composition on the revenue base for the period from July 2017 to June
2018. The same is shown in Table below:

Revenue implications (Based on July 17- June 18 data)
TABLE
(Rs. in crore)
Turnover upto
Total
turnover
Total
tax
payable
Tax paid
in cash
Effective
tax rate
(%)
Cash tax/
turnover
(%)
Rev@
5%
Revenue
Implication
(Comp@5%)
[If 50% avail
composition]
(1) (2) (3) (4) (5) (6) (7) (8)
20 lakh 2,04,797 33,861 15,433 16.5 7.5 10,240 2,597
30 lakh 3,18,696 49,998 23,107 15.7 7.3 15,935 3,586
40 lakh 4,35,136 66,153 30,352 15.2 7.0 21,757 4,298
50 lakh 5,56,840 81,949 37,046 14.7 6.7 27,842 4,602

Number of taxpayers likely to get benefit from composition scheme (taxpayers engaged in providing
services and other supplies and not presently eligible for the composition scheme)- taking 50% of the
base in the slab is as below:

*excluding nil filers/50% of the base in the slab


State Upto Rs. 20
lakh*
Upto Rs. 30
lakh*
Upto Rs. 40
lakh*
Upto Rs. 50
lakh*
All 12,94,267 14,56,936 15,73,539 16,61,883
Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 18 of 27
5.2 The issue was discussed in the said joint meeting and the following recommendations have been
made: -
a) Pursuant to the amended law, composition scheme is permitted to taxpayers whose turnover
does not exceed Rs.100 lakh (Rs.75 lakh for certain Special Category States) and who deal only in goods
subject to provision of services to the extent of 10% of the previous years’ turnover or Rs.5 lakh,
whichever is higher. Thus, service providers to whom the amended law does not apply are not eligible
for composition even though they may be small service providers in terms of turnover.
b) The Council, in its 31st Meeting, accorded in principle approval to have a composition scheme
for small service providers but turnover threshold and the rate of tax was to be discussed by the Law
Committee and the Fitment Committee.
c) It is proposed that, in slight modification of the aforesaid decision of the Council, all those
taxpayers who are not eligible for the composition scheme as per the amended law may be offered an
alternate composition scheme if their turnover in the preceding financial year did not exceed Rs.50 lakh.
Further, they would be liable to pay an amount of tax in lieu of the tax payable by them at the rate of
eight percent of the turnover.
d) It was also felt that instead of extending composition to the aforesaid category of taxpayers, the
benefit of raised threshold for registration of Rs.40 lakh, suggested in a separate agenda item, may be
extended to suppliers of both goods and services. This will have the added advantage of avoiding
differential treatment of goods and services.
e) The above proposal requires amendment to the GST Law and the IT system.
6. Provision of free Accounting and Billing Software to small taxpayers. The above issue was
brought by GSTN (attached as Annexure B) and was discussed in the said joint meeting and was agreed.
A separate presentation will be made by the GSTN to the GoM.
7. The recommendations of the joint meeting of the law committee and the Fitment Committee on
the above issues related to MSMEs, as detailed in paragraph 3, 4 and 5 is submitted to the Group of
Minsters for MSME for further deliberation.

Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 19 of 27
ANNEXURE A
REGULAR TAX PAYERS
SLAB
COUNT
TOTAL TAX PAYABLE (APRIL 2018 TO SEP 2018) TOTAL TAX PAID THROUGH CASH (APRIL 2018 TO SEP 2018)
IN % CGST SGST IGST CESS
TOTAL
TAX
PAYABLE
excl. CESS
IN % CASH_CGST CASH_SGST CASH_IGST CASH_CESS
TOTAL
TAX PAID
THROUGH
CASH
excL. CESS
IN %


NIL 2069731 23.72 6770.67 6746.42 4836.29 745.72 18353.37 1.04 1749.54 1896.13 1181.52 280.54 4827.19 1.41
Upto 5 Lakhs 988128 11.32 1545.35 1543.55 677.95 44.56 3766.86 0.21 376.13 403.57 198.63 4.40 978.33 0.29
5 to 10 Lakhs 629148 7.21 1862.75 1860.57 679.94 53.90 4403.26 0.25 453.68 488.83 229.68 3.36 1172.19 0.34
10 to 20 Lakhs 855459 9.80 4255.06 4231.12 1626.00 185.27 10112.18 0.57 1098.98 1180.02 535.12 14.16 2814.12 0.82
20 to 30 Lakhs 580947 6.66 4417.79 4419.94 1532.13 199.50 10369.86 0.59 1161.34 1255.77 553.65 5.77 2970.76 0.87
30 to 40 Lakhs 421528 4.83 4298.66 4297.26 54335.68 180.11 62931.59 3.57 1052.43 1148.52 512.01 5.74 2712.96 0.79
40 to 50 Lakhs 324951 3.72 4162.50 4168.96 1440.67 204.71 9772.13 0.55 940.48 1047.27 480.27 6.25 2468.02 0.72
50 to 70 Lakhs 474029 5.43 7796.35 7795.35 2774.89 393.30 18366.58 1.04 1596.05 1798.60 873.27 16.23 4267.92 1.24
70 Lakh to 1 Crore 466518 5.35 10534.03 10518.83 4367.06 580.32 25419.92 1.44 1931.57 2234.08 1099.15 19.27 5264.80 1.53
1 Crore to 1.5 Crores 456516 5.23 14517.97 14583.78 5713.42 882.73 34815.16 1.97 2373.93 2839.85 1483.50 23.34 6697.28 1.95
1.5 Crores to 2 Crores 267233 3.06 11643.64 11689.45 4788.70 817.27 28121.79 1.59 1749.36 2156.67 1171.02 66.94 5077.04 1.48
2 Crores to 3 Crores 308246 3.53 18188.41 18211.90 7817.63 1229.91 44217.94 2.51 2536.00 3204.04 1803.23 34.83 7543.28 2.20
3 Crores to 4 Crores 177922 2.04 14111.49 14121.73 6502.82 1048.36 34736.04 1.97 1843.94 2415.92 1369.81 51.16 5629.66 1.64
4 Crores to 5 Crores 116253 1.33 11464.58 11462.21 10684.86 908.01 33611.65 1.91 1430.82 1917.98 1145.47 41.76 4494.27 1.31
5 Crores to 8 Crores 195031 2.24 25920.90 25880.03 13519.92 2116.64 65320.85 3.70 3002.48 4144.03 2582.49 74.45 9729.00 2.84
8 Crores to 10 Crores 72551 0.83 12445.07 12443.09 7264.27 1322.14 32152.43 1.82 1438.72 2028.84 1370.58 51.15 4838.15 1.41
10 Crores to 20 Crores 155588 1.78 39686.74 39646.77 26085.76 4606.56 105419.27 5.98 4397.95 6410.14 4807.86 314.16 15615.95 4.55
20 Crores to 50 Crores 97816 1.12 53199.58 53116.48 44031.17 7584.02 150347.22 8.53 6048.17 9287.51 7484.05 662.97 22819.74 6.65
50 Crores to 100 Crores 33982 0.39 41600.40 41468.38 39912.73 5970.58 122981.52 6.97 5039.48 8057.46 6989.21 497.59 20086.15 5.85
100 Crores to 500 Crores 28118 0.32 96924.87 96668.10 117069.19 14684.09 310662.16 17.62 12695.74 21194.82 22021.54 4560.06 55912.10 16.30
Above 500 Crores 5941 0.07 145049.54 144229.83 348323.60 48992.99 637602.97 36.16 30581.47 42786.70 83810.92 35580.31 157179.10 45.81
Overall 8725636 100 530396.35 529103.73 703984.66 92750.70 1763484.74 100.00 83498.26 117896.75 141702.99 42314.45 343098.01 100.00


Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 20 of 27
COMPOSITION TAX PAYERS
TURN OVER SLAB BASED ON 2017-
18
TOTAL TAX PAID (2018-19) -- JUNE & SEPTEMBER 2018
Numbers
of
taxpayers CGST SGST IGST CESS
Total Tax Paid
Excluding CESS
NIL

3,19,473
15.43 15.43 0.03 0.000 30.88
Upto Rs. 5 Lakhs

3,55,503
33.41 33.41 0.04 0.000 66.86
Rs 5 Lakhs to 10 Lakhs

2,43,986
52.60 52.60 0.06 0.000 105.27
Rs. 10 Lakhs to 20 Lakhs

2,87,041
109.56 109.56 0.11 0.000 219.23
Rs. 20 Lakhs to 30 Lakhs

1,56,784
96.18 96.18 0.09 0.000 192.44
Rs. 30 Lakhs to 40 Lakhs

94,755
78.96 78.96 0.08 0.000 158.00
Rs. 40 Lakhs to 50 Lakhs

59,611
62.87 62.87 0.07 0.000 125.80
Rs. 50 Lakhs to 60 Lakhs

38,599
48.68 48.68 0.08 0.001 97.45
Rs. 60 Lakhs to 70 Lakhs

24,832
35.98 35.98 0.03 0.000 71.99
Rs. 70 Lakhs to 80 Lakhs

15,494
25.01 25.01 0.05 0.000 50.06
Rs. 80 Lakhs to 90 Lakhs

9,222
15.76 15.76 0.02 0.000 31.54
Rs. 90 Lakhs to 1 Crore

5,747
10.16 10.16 0.03 0.000 20.34
Rs. 1 Crore to 1.10 Crore

3,562
6.54 6.54 0.01 0.000 13.10
Rs.1.10 Crore to 1.20 Crore

2,236
4.10 4.10 0.01 0.000 8.21
Rs.1.20 Crore to 1.30 Crore

1,464
2.77 2.77 0.01 0.000 5.55
Rs.1.30 Crore to 1.40 Crore

1,009
1.80 1.80 0.00 0.000 3.59
Rs.1.40 Crore to Rs. 1.50 Crore

746
1.34 1.34 0.00 0.000 2.68
Above 1.5 Crore

2,465
4.37 4.37 0.01 0.000 8.74
GRAND TOTAL 16,22,529 605.51 605.51 0.74 0.001 1211.76


Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM
Page 21 of 27
Annexure B
Provision of Free Accounting and Billing Software to Small Tax Payers (annual turnover upto
Rs. 1.5 crore)
1. Background. GST regime having been promulgated in the country w.e.f. 01st July 2017,
taxpayers were required to file and submit returns electronically at the GST portal that was
implemented by GSTN. The digitalization of the indirect tax regime from the legacy paper-
based one to the electronic, single tax GST was quite revolutionary that resulted in several
challenges to the small businesses. The businesses reached out and communicated their
difficulties and measures were analyzed as to how the concerns and challenges being faced by
the small taxpayers could be alleviated. One of the areas was automation of accounting and
billing. The then Revenue Secretary tasked GSTN with exploring the possibilities of providing
an accounting and billing software to small taxpayers (having annual turnover upto Rs 1.5
Crores) without any cost to the taxpayers.

2. Objectives: The following objectives were expected to be achieved by providing Accounting
and Billing Software without any cost to small taxpayers:
a. A free utility that would address the concerns of cost to the small business.
b. An electronic platform that would digitalise their day-to-day business needs e.g.
inventory management, accounting, billing, etc.
c. The taxpayers would be offered ready to use and mature products from established and
professional product companies.
d. The utility would seamlessly offer the option of return filing, to enable compliance to
GST.
e. Alleviate the compliance burden of the business and taxpayers through a software.
f. The utility would be chosen so as to be business friendly so that semi-literate businesses
could also use it to remain compliant.
3. Methodology: An Expression of Interest was, accordingly published by GSTN in December
2017, calling for software product companies that were working in the financial technology
domain, to participate in the offering of accounting and billing software that would alleviate the
technical difficulties of small businesses and ease their burden of preparing electronic bills,
invoices, returns etc. and enable them to file it seamlessly into the GST System. Basic features
of the accounting and billing software as advertised in the EOI are at Annexure-II.

4. After receiving 43 bids and scrutinizing them for financial viability of the companies, the
technical maturity and functionality of the products, 18 software providers were shortlisted
based on recommendation of a Technical Evaluation Committee. Later three of them offered
to provide the software free of cost for use by small taxpayers. Thus, remaining 15 product
owners were also asked if they were ready to offer the products free of cost to small taxpayers
and support them with NO LIABILITY towards GSTN. Total of 14 out of 18 companies
responded confirming their willingness to provide the accounting software as per EOI free of
cost for use by small taxpayers. They will be free to provide added features at a cost which will
be determined by the market as there will be multiple providers. Also, they will sell the product
to taxpayers having annual turnover above Rs 1.5 Cr.

5. ICAI (Institute of Chartered Accountants of India) was approached to finally perform a rigorous
test of the products to ensure that they were in compliance with the necessary regulatory
provisions and were easy to use and were offering all the basic features as asked in the EoI. The
outcome of the stringent evaluation done by a team of CAs deputed by ICAI has now yielded 7
products of 7 providers, which their owners have agreed to provide free of cost to small
taxpayers for all GST compliance activities to include billing, invoicing, return filing,
ledger/inventory maintenance, P & L and balance sheet maintenance, etc.

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6. It is proposed to provide access to these free software from the GST portal, after seeking the
confirmation from the taxpayers on their turnover and de-risk GSTN from all liabilities that may
arise out of their using the free utilities.

7. The proposed date of go live is from 01st Feb 2019 to be executed in a staggered manner starting
with one to two states, as was done in case of e-way bill.
8. Proposal for perusal of GoM on MSME.



Annexure I

LIST OF SELECTED COMPANIES & PRODUCT NAMES

Final selection:
a. Adaequare Info Pvt Ltd: UBooks (Cloud based)
b. Intuit India Software Solutions Pvt Ltd: QuikBooks (Cloud based)
c. Zoho Corporation Pvt Ltd: Zohobooks (Cloud based)
d. Marg ERP Ltd: Marg (On-premises i.e. Offline)
e. Seshasai Business Forms Pvt Ltd: GenieBooks (Cloud based)
f. Relyon Softech Ltd: Saral Accounts (On-premises i.e. Offline)
g. Focus Softnet Pvt Ltd: FocusLyte (Cloud based)



Annexure II


Feature Set: Basic Version (Free)


Basic Features of Accounting and Billing Software
System should have access for Single User
System should be in English and have all item Units , Financial Years Facility
Supplier, Customers Master Directory with all the required field
Sale / Purchase, Cash Bank Ledger
Should be able to Print invoices and ledger
Should have easy migration of data from one accounting & billing software to other accounting & billing
software
Item (SKU) Search - Search Item by Bar Code, Short Code or by Description.
Item master with HSN code, description, Unit of measure (UoM), price, tax rate etc.
Taxation – Automatic calculation of Taxes (GST) payable. Rate of tax must be editable in the item master
Charges - Includes other charges in the bill.
Cancelling/ Voiding - Sales Bill can be cancelled any time before submission
Search Bill from history- By customer, date or bill number. Min 3 month period for search. For archival,
period will be 5 years. Goods return facility
System should be able to issue/display Credit note Debit note including pending & Replacement Notes
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Supplier Selection - Enter purchase bill either by Supplier or Cash Purchase. Manage supplier master.
Generation of purchase order and maintenance of purchase register
Linking of suppliers invoice with Purchase Order
Automated inventory update basis purchase
Taxation – Automated calculation of GST payable per Purchase Order.
Search purchase - By supplier, date and bill number, it also should show supplier Wise .Min 3 month
period for search. For archival, period will be 5 years.
Generate Profit and Loss and Balance sheet
Sales/ Purchase Register Report - Detailed, Day wise, Item wise Month wise, Quarter for the period
selected.
Sales / Purchase receivable and payable Report
Stock Report ,Return History Report
Cash and bank book
System should be able to export reports and all data to Excel/PDF or any other format as required for
returns.
Generate outward supply return like GSTR3B, GSTR-1 ,GSTR-4 , GSTR 9 or any other returns as the
case may be
Generating mismatch report between downloaded GSTR2A and Local purchase register to help prepare
GSTR2.
Create mismatch report based on GSTR-2A downloaded from GST portal and Purchase register
maintained by the system and then create GSTR-2
Create draft Annual Return based on monthly/quarterly returns filed.




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Agenda Item 11: Report of GoM on Revenue Mobilisation (Modalities for Revenue Mobilisation
in case of Natural Calamities and Disasters)
The Hon’ble Finance Minister of Kerala had submitted a proposal for levy of additional cess on
SGST (State Goods & Service Tax) and other alternative measures like hike in borrowing limit of the
State for raising funds for flood rehabilitation activities. The State of Kerala had specifically requested
for levy of additional 10% cess on SGST in its State for flood relief. Considering the overall facts and
circumstances under GST regime, with a view to provide additional funds for flood rehabilitation to
Kerala, this issue was discussed in the 30th GST Council Meeting held on 28th September, 2018.
Accordingly, on the recommendation of GST Council, a Group of Ministers (GoM) had been constituted
to examine modalities for revenue mobilisation for natural calamities and disasters. Shri Sushil Kumar
Modi, Hon’ble Deputy Chief Minister, Government of Bihar is the Convenor and Finance Ministers of
States of Assam, Kerala, Maharashtra, Odisha, Punjab and Uttarakhand are the Members of this GoM.
2. The terms of reference (TOR) for the ‘GoM on Revenue Mobilisation’ in a case of Natural
Calamities and Disasters shall be to examine the following:
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 mechanism for its collection,
accountal and disbursement, including whether such disbursement should only be for a
major natural calamity/disaster and the criteria thereof;
vi. What changes in law, if any, would be needed to create a GST Disaster Relief Fund.
3. This issue was discussed in the GoM meeting held on 15.10.2018. As per deliberation/decision
of the GoM vide Minutes dated 18.10.2018 of the aforesaid GoM, a set of questionnaire had been
prepared and sent to all States seeking views/suggestions on the following points:
i. Which of the following would be better and convenient mechanism to support the State in
case of Natural Calamity or disaster:
(a) Increase in the borrowing limits of State
(b) Tweaking of NDRF Norms
(c) States specific disaster cess
ii. Whether increase in GST rate or levy of cess would be a better mechanism to raise resources
for supporting a State in case of natural calamities.
iii. Whether increase in GST rate or increase of tax on non-GST goods would be better for
mobilisation of revenue in case of Natural Calamity.
iv. In case of State Specific disaster cess, such cess should be levied on all items or only on
luxury goods over all GST (CGST/IGST/UTGST) or only on SGST.
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v. What would be the amount of revenue mobilized due to increase of 0.25% or 0.5% in SGST
rate as suggested by Kerala Govt? Whether it would be sufficient for meeting the
requirement on account of relief and rehabilitation?
vi. Mechanism for rising of resources for disaster management within the framework of
Disaster Management Act, 2005 and how it should be dovetailed with the recommendations
of Finance Commission.
4. So far, views of States received are as under:
A. Views of Gujarat
i. It has been suggested to ease NDRF norms looking into the gravity of natural
disaster/calamity.
ii. As per provision in Section 12 of the Constitution Amendment Act, 2016 for levy
of special rate/rates for specified period to raise additional resources during
natural calamities/disaster on the basis of recommendation of GST Council,
increasing GST rate and subsequently reversing ITC (Input Tax Credit) to the
extent of such increase in the rate in case of inter-state transaction of such goods
and services seems to be advisable, as it does not require enactment of new law
and there will be no extra compliance cost on tax payer.
iii. Resources may be mobilized by way of increasing GST rate as well as increasing
tax on non-GST goods, leaving it to the concerned State to decide in case of
natural calamities.
iv. There should not be limitation with respect to levying tax on specific items and
State should be allowed to generate resources by way of increasing rate on
specific goods and services depending upon the amount of revenue required for
natural calamity/disaster fund.
v. The rate of tax will depend on extent of relief resources required which will vary
from State to State.
vi. Mechanism for raising of resources for disaster management within the
framework of Disaster Management Act, 2005 should be dovetailed with the
recommendation of Finance Commission.

B. Views of Karnataka
i. As per provision in Article 279A (4) of the Constitution of India, the GST Council
is empowered to make recommendation for levy of special rate/rates for specified
period to raise additional resources during natural calamities/disaster.
ii. Considering the fact that presently a cess is being levied for compensation to the
state, it would be better if rate of tax is increased by 0.25% on supplies of goods
and services or both.
iii. Increase in GST rate is always better option as it would result in mobilisation of
a considerable amount of additional revenue in comparison to non-GST goods.
iv. Any state specific cess should be levied on all supplies of goods or services or
both. It should also be levied on supplies attracting levy of both CGST and SGST
or IGST to avoid distortion in tax levy so that it would facilitate easy flow of input
tax credit within a State or from one State to another without any cascading effect.
The ideal situation would be to levy such cess in all States for creating a Natural
Calamity Fund in each State and a Central Fund through such cess on CGST.
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v. The amount appears to be negligible considering the amount required for relief
works of any natural calamity or disaster.
vi. No comments.
C. Views of Tamil Nadu
i. It should be ensured that the cess or additional tax is levied on the SGST payable
within the respective State. It should be ensured through the system that the tax
only falls on taxpayers in Kerala State. It should not be applicable on IGST
payable when goods are exported from Kerala so that those in Tamil Nadu and
other States buying goods from Kerala are not adversely affected and do not face
any cost increase.
ii. The system changes needed should not adversely affect the functioning of the
GSTN IT system in other States or cause any compliance burden on other States.
iii. It is also suggested that the Council should fix the period during which such Cess
will be levied, as per Article 279 A 4(f) of the Constitution. The period should be
kept short and not indefinite, as otherwise, the basic objective of having a
common national rate will be lost.
iv. The Government of Tamil Nadu in principle agrees to the proposal to levy of
State-specific additional cess on the SGST of the particular State for the purpose
of creating additional resource for funding natural calamities and disasters
through GST.
v. The Government of Tamil Nadu does not support levy of any cess/additional rate
of tax at all India level for purpose of Disaster Reilef Fund or any other purpose.
It should only be by the States which choose to levy it. Funding for National
Disaster Relief Fund should come from the Centre and not from any GST cess or
special levy.

D. Views of Uttarakhand
(i) There are many States, which are prone to concurrent disasters, of varied scale, which
might not be covered by the current NDRF norms, and when the cumulative effect of
all such incidences are aggregated, it would require huge amounts of funds for
mitigation, rehabilitation, reconstruction, currently not included in the norms. Hence,
tweaking of NDRF norms is recommended. Also, providing for State specific disaster
cess, would help, in case of emergency, as the extra revenue generation capacity of the
States are severely restricted post-GST.
(ii) Increase in GST rate is a better option, as identified commodities can be selectively
targeted for revenue generation.
(iii) Increase in GST rate is always a better option, as one can tax a wide array of
commodities.
(iv) In case of State Specific Disaster Cess, it should be levied on all items, over all GST.
(v) Based on historical data on tax accrued, it should be decided, as to what rate of tax
should be additionally charged, and during which period. The upper limit, if need to be
fixed, should be at least 1%.
(vi) The scope of disasters and relief required under disaster management and the funds
should be suitably raised, with provisions for it being made in the Finance Commission
too.
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5. In the second meeting of GoM held on 06.01.2019. a detailed discussion took place with respect
to mobilisation of additional revenue during natural calamities. GoM also took note of the legal opinion
given by the learned Attorney General of India on imposition of cess wherein it has been opined that
Parliament and the State Legislature have the authority to levy any cess for specific purpose. The GoM
also considered the views given by the State Government. Following points were discussed and
recommended by the GoM:
(i) Hon’ble Finance Minister of Uttarakhand apprised the GoM about inadequacy in NDRF
norms for various items of relief. He stated that this was leading to undue financial burden
on States facing the natural disaster and which was already reeling under financial stress.
GoM recommended that the NDRF norms should be considered for revision after due
consultation with State Governments.
(ii) The GoM discussed the pros and cons of the two ways of mobilizing revenue for natural
disasters, viz increase in SGST rate and cess on supply of goods and services. While the
GoM agreed that imposition would require a separate legislation, to ensure uniformity in
SGST rates across the country, cess would be a better way to mobilise revenue for natural
disasters. It will ensure that the revenue so realized could be clearly earmarked and would
be outside the compensation arrangement. GoM noted that as per the Constitutional
provisions, this will have to be recommended for a particular case of natural calamity for a
specified period. Keeping in view the proposal of Kerala, GoM recommended that the
Council may consider allowing levy of a cess on intra-State supply of goods and services
within the State of Kerala at a rate not exceeding 1% for a period not exceeding two years.
(iii) GoM also discussed the issue of relaxation of the FRBM limits of fiscal deficit and felt that
for the purposes of reconstruction after the initial impact of natural calamities, Central
Government may consider allowing States to incur a fiscal deficit higher than the FRBM
targets for a specified period. This would enable States to take up reconstruction activities
without impacting their ongoing development programmes. GoM felt that this could either
be done by excluding the reconstruction expenditure outside the FRBM limits or by
providing additional borrowings over and above the FRBM target over a specified number
of years.
6. The recommendations of GoM on additional revenue mobilisation in case of natural calamities
and disasters are placed before GST Council for further discussion and decision.


Detailed Agenda Note Volume 2 Agenda for 32nd GSTCM