Minutes of the 48^th Meeting of GST Council held on 17^th December, 2022

The 48^th meeting of the GST Council was held on 17^th December, 2022 through video conferencing under the Chairpersonship of the Hon’ble Union Finance Minister, Smt. Nirmala Sitharaman. The list of Hon’ble Members of the Council who attended the meeting is at Annexure-1. The list of the officers of the Centre, States, Union Territories with legislature, GST Council Secretariat and GSTN who attended the meeting is at Annexure-2.

1.2 The following agenda items were listed for discussion in the 48^th meeting of the GST Council as stated below;

1.3 The meeting started with greetings from Hon'ble Members to the Hon'ble Chairperson. The Hon'ble Chairperson welcomed and introduced the new Revenue Secretary, Sh. Sanjay Malhotra to the Hon'ble Members of the Council and thanked ex Revenue Secretary, Sh. Tarun Bajaj for his contribution.

1.4 With the permission of the Chair, the Secretary to the GST Council welcomed all the Hon'ble Members of the Council and participating officers to the 48th meeting of the GST Council.

The Secretary, on behalf of the Council, thanked the following former Hon'ble Members of the Council for their immense contribution -

1. Shri Tarkishore Prasad, ex Member from Bihar
2. Shri Ajit Pawar, ex Member from Maharashtra
3. Shri Sukh Ram Chaudhary, ex Member from Himachal Pradesh

He further extended a warm welcome to the incoming Hon'ble Members of the GST Council to the 48^th meeting of the GST Council-

1. Sh. Devendra Fadnavis, Hon'ble Deputy Chief Minister, Maharashtra
2. Sh. Vijay Kumar Chaudhary. Hon'ble Finance and Commercial Tax Minister, Bihar

and thanked ex. Revenue Secretary, Sh. Tarun Bajaj for his contributions.

1.5 The Secretary stated that in its 47^th meeting at Chandigarh, the Council had formed a GoM on Goods and Services Tax Appellate Tribunal with Sh. Dushyant Chautala, Hon'ble Deputy Chief Minister of Haryana as the Convener and Hon'ble Ministers from States of Andhra Pradesh, Goa, Rajasthan, Uttar Pradesh and Odisha as Members. He stated that the GoM had submitted their recommendations in the form of a report which was placed as an agenda before the Council. He thanked all the Hon'ble Members of the GoM for their valuable recommendations.

1.6 Further, he stated that the GST Council had formed a GoM on Capacity based taxation and Special Composition Scheme in certain Sectors on GST with Sh. Niranjan Pujari, Hon'ble Minister of Finance, Odisha as the Convener and Hon'ble Ministers from Delhi, Haryana, Kerala, Madhya Pradesh, Uttar Pradesh and Uttarakhand as Members. The GoM had submitted its report which was placed before the Council for deliberations. He thanked all the Hon'ble Members of this GoM for their valuable recommendations.

1.7 The Secretary further stated that in this Council meeting, there were agendas for closure of GoM on movement of Gold and Precious Stones and GoM on Levy of Covid Cess on power and pharma sector in Sikkim. He thanked all the Hon'ble Members of these two GoMs for their valuable contributions.

1.8 The Secretary informed that the GST Revenue had set new records this year. The gross GST revenue collected in the month of November, 2022 was Rs. 1,45,867 crore which was 11% higher than the GST revenue in the same month last year. The gross GST revenue collected in the month of October, 2022 was Rs. 1,51,718 crore which was 14% higher than the GST revenue in the same month last year. GST collections have crossed Rs. 1.40 lakh crore mark for the 8th time at a stretch since March, 2022. He thanked ail the States, Central GST formations and Union Territories for their remarkable efforts in revenue augmentation.

1.9 He further informed the Council that he had held a meeting with the officers of the States/UTs on 16^th December, 2022 and had a very frank and fruitful discussion on various agenda items which would immensely help the Council in steering the agenda of this meeting. He sought the permission of the Chair to proceed with the discussions on the agenda.

1.10 The Hon'ble Chairperson requested the Hon'ble Members to offer comments, if any, before proceeding with the agenda items.

1.11 The Hon'ble Member from Tamil Nadu suggested that the meeting could be concluded by 01:30 p.m. and all agenda items that could not be discussed, could be rolled over to the upcoming Council meeting to be discussed in physical mode. He explained that due to budget session approaching, Hon'ble Members would be pre-occupied. Hon'ble Members from Telangana, Gujarat, Karnataka, Maharashtra etc. agreed with this suggestion and many States like Gujarat, Haryana. Kerala and Andhra Pradesh suggested that items could be prioritized and the Tribunal agenda could be discussed on priority. Hon'ble Member from West Bengal stated that she was agreeable with any decision taken by the Council in that regard.

1.12 The Secretary stated that the majority view appears to be that the meeting could be concluded by 01:30p.m. He informed that the officers meeting on 16°' December was concluded by 03:00 p.m. even when the Law Committee agenda was discussed at length. He suggested that a call could be taken around 1:30 p.m. as the meeting progressed. The Hon'ble Chairperson accorded permission to start with the agenda.

2. Agenda Item 1: Confirmation of the Minutes of the 47^th Meeting of the GST Council

The first agenda item pertained to confirmation of the minutes of the 47^th GST Council meeting held on 28^th and 29^th June, 2022 at Chandigarh. The Secretary stated that some comments had been received from few States which were basically editorial changes which had been carried out and the revised minutes incorporated in the agenda and circulated to all the Hon'ble Members.

The Council adopted the Minutes of the 47^th meeting of the GST Council.

3. Agenda Item 2: Ratification of the Notifications. Circulars and Orders issued by the GST Council and decisions of GST Implementation Committee for the information of the Council

The Secretary stated that the second agenda item pertained to ratification of the Notifications, Circulars, and Orders issued by the GST Council and the decisions of the GST Implementation Committee (GIC) for the information of the Council. He stated that the GIC decisions are also implemented through Notifications, Circulars, and Orders. Principal Commissioner, GST Policy Wing informed the Council that subsequent to release of the Agenda. Notification No. 25/2022-Central Tax was issued on 13^th December, 2022 pursuant to the decision of GIC to provide relief to the taxpayers affected by cyclone 'Mandous' by extending the due date for furnishing Form GSTR-1 for November, 2022 for registered persons whose principal place of business is in specified districts of Tamil Nadu. The Council took note of the decisions of the GST Implementation Committee (GIC) and ratified the Notifications. Circulars and Orders issued. Further, the Notifications, Circulars and Orders issued by the States which were pari materia with above Notifications, Circulars and Orders were also ratified.

4. Agenda item 3: Recommendations of the Fitment Committee for the consideration of the GST Council

4.1 The Secretary introduced the agenda item relating to the recommendations of the Fitment Committee. These recommendations had been given in six (06) Annexures where the first three related to goods and the other three related to services. The first Annexure provided details of the items (goods) where some tax rate change or clarification was being recommended; the second Annexure listed items (goods) where no tax rate changes were being recommended and the third Annexure listed items (goods) where the recommendations would be given by the Fitment Committee after further deliberations and approval of the Council would be sought. Categorization on similar lines had been made in fourth, fifth and sixth Annexures pertaining to the services.

4.2 The Secretary to the Council stated that the recommendations of the Fitment Committee were discussed in detail in the Officer's Meeting on 16.12.2022 and most of recommendations were agreed to by all. Then the Secretary asked JS, TRU to take the Council through a brief presentation on the recommendations of the Fitment Committee.

4.3 Joint Secretary. TRU stated that the agenda note dealt with proposals regarding GST rates and clarifications relating to supply of goods and services. The proposed changes emanated from the recommendations made by the Fitment Committee on the basis of representations received from various stakeholders including Ministries and other offices of Centre and States, seeking changes in GST rates/ issuance of clarifications regarding classification and GST rates applicable on supply of certain goods and services.

4.4 She further informed that the Fitment Committee had examined the representations on 12^th& 23^rd September, 2022 and 28^th October, 2022. After examination, the Fitment Committee had recommended changes in GST rates or issue of clarifications, in relation to certain goods and services. Further, the Fitment Committee had recommended no change in respect of certain goods and services. On certain issues. Fitment Committee was of the view that further examination would be required before making any recommendation to the GST Council and thus those issues had been deferred.

4.5 Accordingly, Fitment Agenda for consideration of the GST Council was summarized in six Annexures (I to VI). There were a total of 19 issues relating to goods out of which the Fitment Committee had recommended rate changes or issue of clarifications in case of nine items (Annexure-1 of the Agenda Volume-I). not recommended any change for 8 items {Annexure-Il of the Agenda Volume-I) and deferred two issues (Annexure-IIl of the Agenda Volume-1) for further examination. In case of services, there were a total of 27 issues, out of which the Fitment Committee had recommended rate change in 7 (Annexure-IV of the Agenda Volume-I), not recommended any change for 16 services (Annexure-V of the Agenda Volume-I) and deferred 4 issues (Annexure-VI of the Agenda Volume-I) for further examination.

4.6 Thereafter, JS.TRU presented the Fitment agenda. (Annexure-3)

4.7 The first item of discussion was the proposal for deletion of'pencil sharpener' from entry no. 180 of Schedule II mentioned at SI. No. 1 of Annexure-I. She stated that in the 47^th meeting of the Council, it was decided to increase the rate on this item from 12% to 18% on the recommendation of the GoM on Rate Rationalization. That rate change was carried out by omitting entry 188 in Schedule II. However, inadvertently in entry 180 of the Schedule II, the tax rate pertaining to pencil sharpener remained at 12%. This agenda had been brought before the Council in order to remove this inconsistency.

4.8 The Hon'ble Member from Punjab. West Bengal and Puducherry requested not to increase GST rate from 12% to 18% on pencil sharpener as the item pertains to education of young children.

4.9 JS, TRU then presented the agenda pertaining to by-products of milling of dal/pulses like Kanda, Churi (also known as Chuni), Chilka wherein the Fitment Committee had recommended that in view of the dual use of these products with differential GST rate (Nil when supplied as cattle feed and 5% when supplied as cattle feed ingredients), till the GoM on Rate Rationalization takes a view on rationalization of tax rates under Chapter 23. in order to have clarity and avoid confusion amongst the concerned suppliers regarding the GST rate on the supply of subject goods and for the ease of administration of the levy, these products could be exempted from GST, irrespective of their end use. Fitment Committee also recommended that a clarification be issued to regularize the matter of the intervening period on as is basis from the date of issuance of the last Circular (that is. consequent to 47^th GST Council Meeting) on account of genuine doubts.

4.10 The Hon'ble Member from Madhya Pradesh supported the proposal to exempt the by-products of milling of dal/pulses like Kanda, Churi (also known as Chuni), Chilka from GST, irrespective of their end use.

4.11 The Hon'ble Chairperson suggested that there could be full presentation on agenda 3 (a) and then the floor would be opened for discussion.

4.12 JS, TRU then presented the issue relating to SUV cars wherein doubts had been raised as to whether all four conditions viz. engine capacity exceeding 1500 cc, popularly known as SUV, a motor vehicle of length exceeding 4000 mm and having ground clearance of 170 mm and above need to be satisfied for levying higher cess rate as per entry 52 B of Compensation Cess Notification No. 1/2017 - Compensation Cess (Rate) dated 28.6.2017 or the conditions in Explanation to the entry are optional. Fitment Committee recommended that a clarification be issued to clarify that all four conditions need to be fulfilled for levy of higher compensation cess rate of 22%.

4.13 JS, TRU further explained that interim Report of the Group of Ministers (GoM) on capacity-based taxation and special composition scheme for certain sectors was placed before the GST Council in its 45th Meeting, held on 17.09.2021. One of the categorical recommendations in the Interim Report was for introducing the payment of GST liability under Reverse Charge Mechanism (RCM) on the supply of Mentha Oil, at the first stage of the supply, in terms of modalities worked out by Uttar Pradesh. Now, a request had been made to also include Mentha arvensis, classifiable under HSNCode 3301 25 90, in Notification No. 10/2021-Central Tax (Rate) dated 30.9.2021 under Reverse Charge Mechanism. The Fitment Committee had recommended to include Mentha arvensis, classifiable under HSN Code 3301 25 90, under Reverse Charge Mechanism.

4.14 The next issue was regarding clarification on applicable GST rate and 6/8 digit HS code of carbonated beverages of fruit drink or carbonated beverages with fruit juice. JS TRU explained that in the 45^th Meeting, the GST Council had approved a separate entry for carbonated beverages as long as they are carbonated (irrespective of whether carbon dioxide is added as a preservative or additive). The Fitment Committee recommended that 2202 99 is the appropriate 6 digit code and that to remove any ambiguity, an exclusion be created for such beverages in entry No. 48 of Schedule II of Notification 1/2017- Central Tax( Rate) which deals with fruit pulp or fruit juice based drinks.

4.15 JS, TRU stated that the next issue was to clarify the classification of Rab (Rab-Salawat). The Fitment Committee noted that Rab (Salawat) being in liquid or semi-solid form did not qualify to be classified under HSN 1701, which dealt with solid form of cane or beet sugar and chemically pure sucrose, and since its chemical composition was different from that of molasses, that was not classifiable under HSN 1703. Therefore, the Fitment Committee had recommended to clarify that Rab (Rab-Salawat) falls under HSN 1702 attracting 18% GST.

4.16 The next item presented pertained to issuance of clarification regarding products such as fryums manufactured using the process of extrusion. The Fitment Committee recommended to clarify that the item 'fryums' manufactured using the process of extrusion would fall under CTH 1905 attracting GST @ 18%.

4.17 She presented the next issue regarding clarification sought on applicable IGST rate on items imported for petroleum operations under Notification No. 3/2017-Integrated Tax (Rate) wherein the Fitment Committee had noted that the said Notification provided a concessional rate of duty to such products which attracted a higher rate of GST when those goods were imported for petroleum operations. The Fitment Committee recommended that a clarification could be issued that a taxpayer could claim the lower rate for specific items as given in the Schedule.

4.18 The next item presented was for extending concessional rate of 5% on Ethyl alcohol supplied to refineries for blending with motor spirit (petrol). JS TRU stated that the National Policy on Biofuels - 2018 provided an indicative target of 20% ethanol blending under the Ethanol Blended Petrol (EBP) Program by 2030. Further, during the Budget exercise of 2022-23, additional Basic Excise Duty @ Rs. 2 per litre was levied on Unblended Petrol and Unblended Diesel to promote blending in petrol and diesel in the country. The concessional GST rate of 5% was available only to Oil Marketing Companies (OMCs) like IOCL, BPCL and HPCL under entry 102A of Schedule I of Notification No. 1/2017-Central Tax (Rate) dated 28.6.2017. She submitted before the Council that keeping in view the implementation of the Ethanol Blending Programme, and since concessional GST benefit was already given to OMCs for blending ethanol with petrol, the proposal was to provide the same concessional GST rate of 5% on ethanol supplied to standalone petroleum refineries as well for blending with petrol in order to provide a level playing field. She submitted that Fitment Committee had recommended that the said entry I02A of Schedule I might be amended to include refineries in addition to Oil Marketing Companies.

4.19 JS, TRU then informed the Council about agenda 3 (b) which pertained to the list of goods where no change in GST rate had been recommended by the Fitment Committee.

4.20 The Hon'ble Chairperson then opened the floor for discussion except for pencil sharpeners and by-products of milling of dal/pulses on which comments had already been made by the Hon'ble Members.

4.21 The Hon'ble Member from Haryana stated that as per proposal on SUVs, a higher rate of Compensation Cess would be applicable on motor vehicles which were popularly known as SUVs 'and' which satisfied all the other three conditions, viz. (i) the engine capacity exceeds 1500 cc (ii) the length exceeds 4000 mm; and (iii) the ground clearance was 170 mm and above. He suggested that in case a sedan car which fulfilled all three conditions after and may also be called an SUV so as to avoid any confusion, he suggested to remove the word 'and' in the clarification being recommended by the Fitment Committee. He requested for a clarification in that regard.

4.22 JS, TRU clarified that the definition of SUV had been carried forward from the Central Excise regime and a vehicle to be called SUV, all four conditions need to be fulfilled and would not cover sedan car accordingly.

4.23 The Secretary clarified that that proposal was for vehicles which were popularly known as "SUV and also fulfilled remaining three conditions to be classified as a SUV.

4.24 The Hon'ble Member from Haryana further stated that there was a category of cars like Multi Utility Vehicle (MUV), which might also fulfil above conditions, but would not attract a higher rate of tax since that was not called a SUV.

4.25 The Hon'ble Chairperson asked JS TRU from where the definition of SUV was derived. JS, TRU responded that the definition of SUV was carried forward from the Central Excise regime. The Hon'ble Chairperson enquired about how the issue of compensation cess in case of other variants of vehicles like MUV that were available in the market would be addressed. JS, TRU responded that that aspect was yet to be seen.

4.26 The Chairman, CBIC suggested that other types of vehicles could also be included which satisfy the other three conditions as pointed out by the Hon'ble Member from Haryana. The Hon'ble Chairperson further enquired about the treatment of MUVs under that proposal.

4.27 The Chairman, CBIC suggested that MUVs might also be included in the Explanation for levy of higher rate of compensation cess @ 22% like SUVs. The Hon'ble Chairperson enquired whether the suggestion of Chairman, CBIC would satisfy the query of the Hon'ble Member from Haryana. The Hon'ble Member from Haryana responded that there was a need to restudy this proposal and bring that back in the future GST Council meetings to avoid any instances of tax evasion.

4.28 The Hon'ble Chairperson proposed that an additional line might be inserted in the clarification that that was applicable only to SUVs and as regards other descriptions of vehicle like MUVs, the matter should be studied and brought back before the Council in the upcoming meetings. The Hon'ble Member from Karnataka supported the view taken by the Hon'ble Chairperson.

4.29 The Hon'ble Member from Uttar Pradesh, referring to the agenda item on 'Rab' suggested that both Jaggery and 'Rab' were made from sugarcane juice and were mostly used by poor people. Thus the rate of GST on both Jaggery and Rab should be kept the same. He further stated that Rab was not a raw material for liquor preparation, so that should not attract GST rate of 18%.

4.30 The Hon'ble Chairperson clarified that the issue brought before the Council was only to clarify the classification of Rab. And that the clarification was necessitated as certain States had issued notices classifying Rab as similar to molasses under Chapter 1703 demanding 28% GST. No new tax had been proposed on Rab. If the Hon'ble Member from Uttar Pradesh wanted to propose a lower rate than 18% on Rab due to genuine reasons, that could be brought back before the Council as a separate agenda in the upcoming meetings.

4.31 The Secretary clarified that the proposal was only for the purpose of clarification on classification and applicable tax rate on Rab, as divergent tax rates were being made applicable on that item across the States. As already stated by the Hon'ble Chairperson, the suggestion for a lower tax rate on Rab could be brought back before the Council as a separate agenda in the upcoming meetings.

4.32 The Hon'ble Member from Punjab stated that the tax rate on ethyl alcohol supplied to refineries for blending with motor spirit (petrol) should not be decreased to 5% as it would lead to tax evasion in the State.

4.33 The Secretary clarified that the concessional GST rate of 5% was available only to Oil Marketing Companies (OMCs). The proposal was to provide the same concessional GST rate of 5% on ethanol supplied to standalone petroleum refineries as well for blending with petrol in order to provide a level playing field, keeping in view the implementation of the Ethanol Blending Programme.

4.34 The Secretary to the Council also clarified that the rate on Pencil Sharpener was increased from 12% to 18% on the basis of recommendation of GoM to rectify inverted duty structure and to address the inconsistency. The Hon'ble Chairperson further clarified that the proposal was only for removal of inversion in duty rate structure and to streamline the tax structure on the item. She stated that the inversion scenario on the item, quantum of refunds being given etc. could be examined in detail by the Fitment Committee and then a fresh proposal brought as to whether a lower rate of GST on pencil sharpeners could be considered.

4.35 Further, the Secretary stated that the Council may approve the existing proposals in Agenda-3 (a) whereas the issues raised by the Members regarding the lower tax rate on pencil sharpener; compensation cess on vehicles which were similar to SUV and fulfilling the mandated conditions; and lower GST rate on Rab would be taken up in the upcoming GST Council meetings after detailed deliberation by the Fitment Committee.

4.36 The Hon'ble Chairperson instructed that issues regarding enhanced Compensation Cess on vehicles which were similar to SUV, rate of tax on Rab and on pencil sharpeners because of duty inversion would be examined by the Committee again and brought back to the Council for decision as fresh proposals.

The Council approved the proposals as detailed in Agenda 3(a).

4.37 JS, TRU further informed the Council that no change was being proposed in the tax rates of items mentioned in agenda 3(b), while agenda 3(c) contained list of goods on which decision has been deferred for upcoming GST Council meetings.

4.38 The Hon'ble Member from Puducherry requested to reduce the GST rates from 18% to 12% on the items like water pump set, kitchen ware and spoon mentioned in agenda 3(b) respectively as farmers are totally dependent on ground water and no other source of water is available with them while kitchen items are used by common public specially by the women.

4.39 The Secretary clarified that these tax rates were adopted on the recommendations of the GoM/Fitment Committee to remove the inverted duty structure and he requested the Hon'ble Members that such issues should not be reopened so early with a view to providing certainty and consistency in tax policy.

4.40 The Hon'ble Member from Puducherry stated that the current system did not provide a mechanism to States/UTs to present their views and concerns before the Fitment Committee or GoM.

4.41 The Hon'ble Chairperson stated that the Hon'ble Member from Puducherry could raise his concerns to the Council in writing and the Fitment Committee would examine these concerns afresh in detail. As of now the agendas 3 (b) and 3 (c) could be approved.

The Council approved the proposals as detailed in Agendas 3 (b) and 3(c).

4.42 JS, TRU further presented the agenda 3(d) i.e., Recommendations made by the Fitment Committee for making changes in GST rates or for issuing clarifications in relation to services. She presented the following issues-

• To extend validity of GST exemption on Viability Gap Funding (VGF) paid to Selected Airline Operators (SAOs) for operating flights under Regional Connectivity Scheme (RCS) for further period

• Omission of entry 23A of Notification No. 12/2017-CTR dated 28.06.2017 which provides exemption to the service by way of access to a road or a bridge on payment of annuity.

• To clarify the applicability of GST on revenue apportioned by Indian Railways (IR) to SPVs and O&M costs charged by Indian Railways from SPVs.

• To clarify applicability of GST on Air Force Officers Mess.

• To clarify whether GST is applicable on the incentive paid by MEITY to the Banks under the Scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions.

• To clarify the applicability of GST when the residential dwelling is rented by a person who is the proprietor of a proprietorship firm in his personal capacity for use as his own residential dwelling. The proposal was to amend the entry as well as insert an Explanation to the entry No. 12 of Notification No. 12/2017-CTR

• To specify a positive list of services under Sr. No. 3 & 3A of Notification No. 12/2017-Central Tax (Rate).

4.43 The Secretary informed the Council that on the issue of clarificatory circular regarding applicability of GST on Air Force Officers' Mess, a suggestion was received during the officers' meeting to include similarly placed messes also. He stated that if the Council agrees, the proposed circular may be suitably amended to include similarly placed messes.

4.44 JS, TRU informed the Council that pursuant to the suggestions received in the Officers' meeting it was proposed that only Explanation could be inserted in entry No. 12 of Notification No. 12/2017-CTR and the same could be issued only in respect of proprietorship concern, if agreed to by the Council. Further, it could be clarified that incentives paid to banks under the scheme for promotion of RuPay Debit Cards and BHIM-UPI transactions were in the nature of subsidies and thus, not taxable.

4.45 The Hon'ble Member form Tamil Nadu informed that in the meeting at Chandigarh, the State of Tamil Nadu had raised some concerns and submitted a list of concerns in writing also regarding positive list of services. He stated that where all States. Central and Local bodies service procurements were exempt, then imposing a list of positive services would result in additional expenditure and that might be seen as discriminatory against the local Self-Governance Principle. He suggested to leave the entire schedule as exempt for States. Central and Local bodies rather than specifying a positive list.

4.46 The Hon'ble Member from Maharashtra suggested that a positive list of services should be specified to avoid ambiguity. Otherwise, States would have to come to Council every time for clarification.

4.47 The Hon'ble Member from Telangana sought exemption for minor irrigation work/maintenance services of minor irrigation tanks from GST as State of Telangana had around 46,000 minor irrigation tanks through which 25 lakh acres of land was being irrigated every year which attracted meagre or almost NIL material component. He further requested exemption of the Public Distribution System (PDS) related services like custom milling and transportation services from GST.

4.48 The Hon'ble Member from Delhi requested to follow the lists of functions enumerated in the Eleventh and Twelfth Schedules to Article 243G and Article 243W respectively and if there were instances of tax evasion then the Council can issue some clarifications rather than pruning the said lists. He stated that bringing a positive list would create a lot of ambiguity and confusion.

4.49 The Hon'ble Member from Karnataka suggested that if there were any other additional services then the Council should take that as specific cases. However, all the services which are as per the Constitution should be kept untouched.

4.50 The Hon'ble Member from West Bengal also suggested that there was no requirement to prune the list of services and all functions as listed out in Articles 243G and 243W of the Constitution should be exempted.

4.51 The Hon'ble Member from Uttar Pradesh. Gujarat, Goa, Tripura and Assam supported the proposal of the Fitment Committee to have a positive list of specified Services.

4.52 The Hon'ble Member from Andhra Pradesh requested to exempt pure manpower services which were hired by the Government or Government agencies and that in case of local bodies, entire services mentioned in Eleventh and Twelfth Schedules of the Constitution should be exempted.

4.53 The Hon'ble Member from Kerala suggested to take the issue later as it required more discussion.

4.54 The Secretary stated that in GST regime there were no end use-based exemption in case of supply of goods to Government. However, in case of services during the Service Tax regime, the tax was collected by the Centre and appropriated by the Centre. Thus, there were certain end use-based exemptions available in case of specific services rendered to Central and State Governments. Under GST regime, the distinction between the Goods and the Services had been removed. He opined that end use exemption in the case of services should also be not there. He stated that the list of 12 services identified by the Fitment Committee covers 90% of the services rendered by the local authorities. Further, he suggested that certain works like construction of tanks etc. had more component of goods and including them would make it difficult for the tax authorities to ascertain whether it was supply of goods or services. Accordingly, the Council had recommended to come up with a pruned list of services under positive list.

4.55 The Hon'ble Member from Tamil Nadu stated that he did not agree that there was consensus on the issue and suggested that vote might be taken on the matter. He also requested that his dissent might be taken on record.

4.56 The Hon'ble Members from Delhi, Kerala, Andhra Pradesh and West Bengal stated that they did not agree with the proposal of the Fitment Committee to specify a positive list of services under Sr. No. 3 & 3A of Notification No. 12/2017-Central Tax (Rate).

4.57 The Hon'ble Chairperson, after duly considering the views of the Hon'ble Members, decided to postpone the discussion on the positive list of services for upcoming Council meetings.

The Council decided that all proposals under agenda item 3(d) were approved except the issue of specifying a positive list of services under Sr. No. 3 & 3A of Notification No. 12/2017-Central Tax (Rate) which was deferred.

4.58 JS, TRU then presented Agenda 3(e) where no changes were recommended by the Fitment Committee in respect of certain services.

4.59 The Secretary requested for comments from the Hon'ble Members on Agenda item 3(e).

4.60 The Hon'ble Member from Maharashtra raised the issue of GST rate on under construction apartments. In the same building, there were both residential units where no 1TC is available as well as commercial units where ITC is available. He informed that it was very difficult to keep proper accounting in this scenario. He suggested that in case of residential building with mixed use, there should be uniform 10% GST with ITC on construction service.

The Council approved the proposals in Agenda 3(e).

4.61 JS, TRU further informed the Council that agenda 3(f) was regarding four issues which had been deferred.

The Council approved the proposals in Agenda 3(f).

4.62 The Hon'ble Members from Odisha and Telangana requested to exempt the levy of GST of 18% on Tendu leaves because it was a matter involving the livelihood of tribal people. Further, the Tendu leaves were used only in Bidi making which was leviable to GST @ 28% and there was no possibility of inverted duty structure.

4.63 The Hon'ble Chairperson requested the Hon'ble Members from Odisha and Telangana to forward their submissions to the Fitment Committee which in turn would study the issue in detail.

5. Agenda item 4: Report of the Committee on Levy of penal interest on delayed remittances of GST by the Banks to the Government Accounts in RBI during the initial period of GST implementation

The Secretary presented the Agenda No. 4 pertaining to the Report of the Committee on Levy of penal interest on delayed remittances of GST by the banks to the Government Accounts in RBI during the initial period of GST implementation and informed that this agenda was presented by the Joint Secretary, GST Council Secretariat during the officers meeting held on 16.12.2022 and there was unanimous acceptance by everyone on the proposal being made in that agenda (The detailed presentation attached as Annexure-5).

The Council took note of the same and approved the agenda.

6. Agenda item 5: Performance Report of the NAA (National Anti-Profiteering Authority for the 1st quarter (April, 2022 to June, 20221 and 2nd Quarter (July. 2022 to September 2022) along with monthly performance report for the month of October. 2022 and November, 2022 for the information of the Council

The Secretary presented the Agenda No. 5 regarding performance report of National Anti-Profiteering Authority (NAA) for the 1^sl quarter (April, 2022 to June, 2022) and 2^nd quarter (July, 2022 to September. 2022) along with monthly performance report for the month of October and November, 2022 for the information of the Council and informed the Council that work of NAA had been shifted to Competition Commission of India from 01.12.2022 as per the decision of the GST Council in its 45th meeting.

The Council took note of the same and approved the agenda.

7. Agenda Item 06: Ad-hoc Exemptions Orders issued under Section 25(2) of the Customs Act, 1962 to be placed before the GST Council for information

7.1 The Secretary presented the Agenda No. 6 i.e., Ad-hoc exemption orders issued under Section 25(2) of the Customs Act, 1962 to be placed before GST Council for information. He informed that in the 26°'meeting of the GST Council held on 10.03. 2018. it was decided that all ad-hoc exemption orders issued with the approval of the Hon'ble finance Minister as per the guidelines contained in Circular No. 09/2014-Customs dated 19.08. 2014 as was the case prior to the implementation of GST. shall be placed before the GST Council for information. The Secretary informed the Council that three Ad-hoc exemption orders had been issued since last meeting of the GST Council.

7.2 The Hon'ble Member from Tamil Nadu suggested the word 'for information' be replaced with 'deemed ratification' in case of ad-hoc exemption orders.

7.3 The Hon'ble Member from Goa suggested that it would not make any fundamental difference whether it was "for information' or 'deemed ratification". He suggested that present practice of placing ad-hoc exemption orders issued under Section 25(2) of the Customs Act, 1962 before the GST Council for information could be continued.

The Council took note of the ad-hoc exemption orders issued.

8. Agenda Item 7: Issues recommended by the Law Committee for the consideration of the GST Council

The Secretary took up the next Agenda on issues recommended by the Law Committee for the consideration of the GST Council. He informed that these agendas were discussed in detail in the Officers' Meeting held on 16^lh December, 2022 and there was an agreement in the Officers' meeting on most of the issues. He stated that in the Officers' meeting, concerns were raised on the agenda item pertaining to deletion of clause (d) of sub-rule (14) of Rule 138 of COST Rules which was proposed for providing a uniform threshold for intra-state movement of goods and it was suggested that the agenda item need not be considered for approval by the Council. He requested Principal Commissioner, GST Policy Wing to make a presentation on the recommendations of the Law Committee and the discussions held in Officers' meeting on 16^th December. 2022 on the same. The Principal Commissioner, GST Policy Wing accordingly made the detailed presentation (attached as Annexure-4) giving overview of the recommendations made by the Law Committee and the discussions in Officers' meeting on the said agenda.

8.1 Agenda Item 7(i): Amendment in the CGST Rules, 2017 for Aadhaar based Biometric authentication of the registrants

A- Biometric-based Aadhaar authentication and physical verification for new registration

8.1.1 Principal Commissioner, GST Policy Wing informed that Rule 8 (4A) of the CGST Rules, 2017 inserted vide Notification No. 94/2020-Central Tax dated 22.12.2020 provided for biometric-based Aadhaar authentication but the said provision is yet to be notified. He informed that the GoM on GST System Reforms in its first report had approved the proposal to improve the registration process by using mandatory biometric authentication for high-risk applicants for registration under GST and the pilot project is to be conducted in the State of Gujarat. The GoM had recommended mandatory physical verification only in case of high-risk applicants in cases where the Aadhaar authentication is not opted for or has failed. The issue was deliberated by the Law Committee and it had recommended mandatory physical verification in all cases where the Aadhaar authentication is not opted for or has failed.

8.1.2 Law Committee recommended substitution of Rule 8 (4 A) of the CGST Rules. 2017 in order to mandate biometric-based Aadhaar authentication for high-risk applicants who opt for authentication of Aadhaar number. Further, Law Committee recommended insertion of sub-rule (4B) in Rule 8 of the CGST Rules. 2017 to provide for exemption from biometric-based Aadhaar authentication in States/UTs where the pilot project is not being undertaken. It also recommended amendment of sub-rule (5) of Rule 8 of the said Rules in order to provide that acknowledgement shall be issued to the applicant only after completion of biometric-based authentication. In addition. Law Committee recommended amendment to said Rule 9 to provide for mandatory' physical verification of an applicant who has undergone biometric-based Aadhaar authentication and is identified on the common portal, based on data analysis and risk parameters. The Principal Commissioner. GST Policy Wing further mentioned that Law Committee had also recommended that the above amendments to Rules 8(4A), 8(5) and 9 may be made only in Gujarat SGST Rules, 2017 and in the CGST Rules, 2017 at this stage. He added that Rule 8(4B) needs to be introduced only in the CGST Rules. 2017 and that Centre will need to issue a Notification under Rule 8(4B) for specifying all States and UTs, except State of Gujarat, where provisions of Rule 8(4A) will not apply.

8.1.3 The Hon'ble Member from Haryana stated that at present, the time limit for verification of registration applications in non-Aadhaar cases is 30 days and he requested that the time limit for such non-Aadhar based verification be raised to 90 days as many fake companies get deemed registered after a period of 30 days. He requested the council to increase the time limit for verification to either 90 days or to 60 days in order to enable the officers to physically verify those companies.

8.1.4 The Secretary clarified that the time limit for processing of the application of registration in cases, where Aadhaar number was not authenticated, had been kept at 30 days in line with ease of doing business for providing registration as quickly as possible.

B. Incorporation of details of electricity bill and property registration in FORM GST REG-01

8.1.5 Principal Commissioner, GST Policy Wing informed that the Group of Ministers on GST System Reforms in its first report had approved the proposal to include Electricity Bill meta data (CA No.) as a data field during registration by new taxpayers and that the CA Number shall be verified to improve the quality of registered address. The States of Maharashtra and Madhya Pradesh had agreed to carry out the pilot project for the same. Besides, the State of Madhya Pradesh had also volunteered for the pilot project for validation of the property registration details from the Land Revenue department.

8.1.6 The issue was deliberated by the Law Committee and recommended that the details of Electricity consumer account number (CA Number) and Property registration be sought under State Specific Information at SI. No. 24 of FORM GST REG-01. It further recommended that the details of Electricity CA Number could be notified under said SI. No. 24 by the State of Maharashtra and details of Electricity CA Number and property registration could be notified under said SI. No. 24 by the State of Madhya Pradesh.

8.1.7 The Hon'ble Member from Madhya Pradesh thanked the Council for considering their proposal to make the registration process effective. He further submitted that if the documents such as electricity bill or documents related to place of registration submitted by the applicant during the registration process were verified through API. then that would curb the practice of obtaining registration through forged documents. The Hon'ble Member from Madhya Pradesh thanked the Council for including their State in the pilot project. He further stated that as most of the applications of new registration were received from urban areas, therefore, there was a need to utilize the database of Land Revenue department as well as Urban Development department for verification of place of registration and thus, that was advisable to include Urban Development department in point no. 5 & 6 (3) of Agenda item 7(i)(b).

8.1.8 The Secretary informed the Hon'ble Member that this issue was also discussed during the Officers' meeting and that the suggestion of Madhya Pradesh had been taken note of for doing the needful.

C. Enhancement in GST Registration to restrict misuse of PAN

8.1.9 Principal Commissioner, GST Policy Wing informed that at present GST Registration was PAN-based. However, OTP-based verification in Part-A of FORM GST REG-01 was done to verify only the mobile number and email address provided by the authorized signatory and no intimation was sent to the mobile number and email address of the PAN holder when a GST registration was applied for. It was stated that that communication gap might result in misuse of PAN of a person, without his knowledge, by unscrupulous elements.

8.1.10 The issue was deliberated by the Law Committee and it recommended that PAN-linked mobile number and email address (fetched from CBDT database) might be captured and recorded in FORM GST REG-01 and further, OTP based verification in Part-A of FORM GST REG-01 might be done only on PAN-linked mobile and email address, instead of authorised signatory's self-declared mobile number and email address.

8.1.11 Accordingly. Law Committee proposed amendments in CGST Rules and FORM GST REG-01 as detailed in the agenda note.

The Council agreed with the said recommendations of the Law Committee in agenda item 7(i).

8.2 Agenda Item 7(ii): Refund to unregistered persons

8.2.1 Principal Commissioner. GST Policy Wing stated that representations had been received from unregistered buyers/recipients for providing a facility to such unregistered buyers/ recipients for claiming refund of amount of tax borne by them in the event of cancellation of the contract/agreement for supply of service of construction of flats/buildings or on termination of long-term insurance policy etc. wherein they had paid the consideration/premium in full/part, along with the applicable tax.

8.2.2 Those issues were discussed in the Law Committee and it was observed that under Section 54(1) of CGST Act, 2017, there was no restriction under GST law for any unregistered person from claiming refund. Further, it was observed that Section 54(8)(e) of the said Act. provides that the refund would be paid to the applicant instead of being credited to Consumer Welfare Fund (CWF). where such amount relates to the tax and interest, if any. or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person. GSTN had also introduced a new functionality which allowed unregistered persons to take a temporary registration and apply for refund under the category 'Refund for Unregistered person'. The Law Committee recommended amendments in CGST Rules, 2017 as detailed in the agenda note and for issuance of a Circular for clarifying the procedure for filing application by the unregistered persons for refund of amount of tax borne by them in the event of cancellation of the contract/agreement for supply of service of construction of flats/buildings or on termination of long-term insurance policy and processing of such refunds.

8.2.3 Principal Commissioner. GST Policy Wing also mentioned that in case of refund by a person, other than the supplier, the relevant date for filing refund application would be the date of receipt of goods or services as per clause (g) of Explanation (2) under Section 54 of the CGST Act. The Law Committee observed that in respect of cases where the supplier and the unregistered person had entered into a long-term contract/agreement for the supply, with the provision of making payment in advance or in installments but if the contract was cancelled/ terminated before supply of service, partially or fully, for any reason, there might be no date of receipt of service, to the extent supply had not been made/rendered. In this regard. Law Committee recommended that for the purpose of determining relevant date in such cases in terms of clause (g) of Explanation (2) under Section 54 of the CGST Act, 2017, date of issuance of letter of cancellation of the contract/ agreement for supply by the supplier might be considered as the date of receipt of the services by the applicant.

The Council agreed with the recommendations of the Law Committee detailed in agenda item 7(ii), along with the proposed amendments in CGST Rules, 2017 and the proposed Circular.

8.3 Agenda Item 7 (iii): Decriminalization of the CGST Act, 2017

8.3.1 Principal Commissioner. GST Policy Wing informed that the issue of decriminalization of various laws, including GST law, to reduce compliance burden on the taxpayers, was discussed in the meeting of Committee of Secretaries (CoS) on Decriminalization of existing Acts/Rules. It was also deliberated that there might be a need to examine whether any enhancement was required in the threshold for prosecution of offences under Section 132 of the Central Goods and Services Tax Act, 2017.

8.3.2 Accordingly, Law Committee deliberated on the various provisions pertaining to prosecution and compounding in the CGST Act, 2017, so as to rationalize the same and to remove ambiguity, if any, and also to make compounding provisions more attractive in GST for the taxpayers. The Law Committee proposed several amendments in GST law as detailed out in the agenda note for decriminalizing various provisions of the GST Act.

8.3.3 The Law Committee recommended that the offences specified in clauses (g), (j) and (k) of sub-section (1) of Section 132 are specifically covered and are punishable under Indian Penal Code, and therefore, these types of offences may be excluded from prosecution under the CGST Act. 2017. It further recommended deletion of clause (iii) of sub-section (I) of Section 132 of the CGST Act, 2017 so that the monetary limit for prosecution is raised to Rs two crore from the current Rs one crore. The Law Committee also recommended to reduce the range of compounding amount to minimum of 25% of the tax amount to maximum of 100% of tax amount in the CGST Act, 2017. The Principal Commissioner, GST Policy Wing informed the Council that during the Officers" meeting, the States of Punjab and Tamil Nadu were of the view that the threshold for prosecution might not be changed for issuers of fake invoices. He stated that detailed deliberations took place on that proposal in the officers' meeting wherein general view was that the proposal made in the agenda note, as recommended by Law Committee, might be agreed to at present and in future, if any misutilization of those provisions was noticed, then the same would be re-visited.

8.3.4 The Hon'ble Member from Tamil Nadu stated that they agreed with proposal for decriminalization of GST Law, except in respect of bill traders who are a bane on the system. He stated that increasing the monetary limit for prosecution to Rs two crore from the current Rs one crore will have serious implications on revenue. He mentioned that in their State, they had detected 471 cases under Rs. one crore with a revenue implication of Rs. 222 crore. He stated if the limit is raised from Rs. one crore to Rs. two crore, only 241 cases could be prosecuted with a revenue implication of Rs. 350 crore. He stated that since bill trading causes greatest revenue loss, therefore bill trading upto Rs. 2 crore should not be decriminalized and threshold should be retained at Rs. one crore as indicated by the data. He further stated that that was quite difficult to prosecute such bill traders as civil cases and that was much more effective to prosecute them as criminal cases.

8.3.5 The Hon'ble Member from Puducherry stated that they completely agreed with the views of State of Tamil Nadu and added that in small UTs like Puducherry, it would not be possible for them to book cases if the threshold for prosecution was raised to Rs. two crore.

8.3.6 The Hon'ble Member from Goa stated that if the threshold for prosecution was increased to Rs. two crore then many cases would go out of the prosecution net. He stated that the threshold should be maintained at Rs. one crore so that there was some fear in dodging the payment of GST especially in case of trading of invoices.

8.3.7 The Hon'ble Member from Kerala stated that the limit for prosecution should continue at the present threshold, especially with regard to the bill trading. He suggested that the existing provisions could be continued as of now and the enhancement of threshold might be considered at a later stage.

8.3.8 The Hon'ble Member from Punjab stated that it would be desirable if the limit for prosecution for fake invoices cases could be brought down to 10 lakh rupees.

8.3.9 The Secretary presented before the Council the statistics of arrest and prosecution cases made by CBIC formations. He informed that a total of 1074 cases of arrest were made by CBIC and that majority of cases were more than Rs. 50 crore i.e. 254 cases and in Rs. 30-50 crore limit, there were 106 cases Thus, the majority of cases pertained to high evasion cases involving amounts of more than Rs 2 crore. The Secretary stated that the Council could consider these statistics while deciding on the issue of threshold limit for prosecution of cases.

8.3.10 The Hon'ble Member from Tamil Nadu stated that besides CBIC, States were also filing prosecutions for GST offences. He also mentioned that whether prosecuted or not. the deterrence value of criminality was a significant component for deciding about the threshold for prosecution. He mentioned that as per his understanding, all the members who had spoken on the agenda item, appeared to be in favour of either keeping the limit at Rs. one crore or lowering that further. He mentioned that offence of issuance of fake bills came under a separate sub­section and therefore, there should not be any difficulty in imposing different limit for prosecution of Rs. one crore for bill trading and Rs. two crore for other violations. The Member further stated that at the end of the day, the GST Council, which comprised elected representatives of the different governments, should be the deciding body. The Hon'ble Member stated that that was his humble submission that once the Committee had submitted the report then the decision should be that of the Members and in cases where there was unanimous view from Members then that should be taken as consensus.

8.3.11 The Hon'ble Chairperson thanked the Member from Tamil Nadu for his inputs and assured him that when the Law Committee or Fitment Committee recommendations were brought to the Council then that was for the Council to decide on the recommendations. The Hon'ble Chairperson further stated that she would like to gently remind the Council that even if there were one or two voices that were different then that was her understanding that until everyone was convinced there was no unanimity. The Hon'ble Chairperson added that she was conscious that in the meeting there was no majority or unanimity of opinion on the agenda item and that there were voices on both sides.

8.3.12 The Hon'ble Member from Maharashtra stated that they totally supported the proposal made by the Law committee as statistics given by the Secretary held true even for the State of Maharashtra. The Hon'ble Member further elaborated that that was often seen that although that had deterrence value, that was impractical to prosecute so many people. He further stated that when the whole country was moving towards decriminalization, that was a very valid decision to raise the threshold for prosecution in GST to Rs. two crore.

8.3.13 The Hon'ble Member from Chhattisgarh stated that that was a very wise decision for the Chairperson to call for unanimity and he stated that they would go by the decision of the Hon'ble Chairperson.

8.3.14 The Hon'ble Member from Goa stated that there were valid points on both sides and the decision on the said agenda could be left to the decision of the Chairperson of the Council.

8.3.15 The Hon'ble Member from Kerala stated that the Council could continue with the present threshold and in future the matter could be relooked at. He further stated that their State was dealing with large number of cases on bill trading, therefore, deterrence must be there.

8.3.16 The Hon'ble Member from Jharkhand stated that there was no disagreement with the proposal in the said agenda.

8.3.17 The Hon'ble Chairperson stated that while threshold for prosecution might be increased from Rs 1 crore to Rs 2 crore for all other offences, however, for issuance of fake invoices, the threshold limit could be retained at Rs. one crore, instead of raising that to Rs. two crore. The Hon'ble Chairperson left the decision open to the Council and requested the members to speak.

8.3.18 The Hon'ble Member from Tamil Nadu stated that he fully agreed with the Hon'ble Chairperson.

The Council agreed with the recommendation of the Law Committee in agenda item 7(iii) with modification that the threshold for prosecution be increased to Rs 2 crore from Rs 1 crore for all offences, other than the offence pertaining to issuance of fake invoices.

8.4 Agenda Item 7 (iv); Amendment in Rule 94 of the CGST Rules, 2017 and Section 56 of the CGST Act, 2017 to provide for exclusion of time period of delay in sanction and disbursal of refund where such delay is attributable to applicant.

8.4.1 Principal Commissioner. GST Policy Wing informed that the provisions of Section 56 of the CGST Act, 2017, Rule 94 of the CGST Rules, 2017 and Para 34 of the Master Circular No. 125/44/2019-GS'I" dated 18.11.2019 did not provide for any exceptions from payment of interest in cases of delayed refunds, where the delay in sanction or payment of refund was attributable to the applicant, as detailed in the agenda note, on account of not filing reply in prescribed time limit or seeking additional time to file documents/reply or for personal hearing. Further, there could be instances where the refund was sanctioned within time but the refund could not be credited to the bank account of the applicant within 60 days due to PFMS bank account validation error or wrong details of bank account submitted by the applicant.

8.4.2 The Law Committee deliberated on that issue and recommended amendment in Section 56 of the CGST Act. 2017 in order to provide enabling provision for prescribing the manner of computation of period of delay for purpose of calculation of interest payable on delayed refund in the CGST Rules, 2017. The Law Committee also recommended amendment in Rule 94 of the said Rules for prescribing the manner of computation of period of delay for purpose of calculation of interest payable on delayed refund.

The Council agreed with the recommendation of the Law Committee in agenda item 7(iv).

8.5 Agenda Item 7 (v): Clarifying the manner of re-determination of demand in terms of sub-section (2) of Section 75 of the CGST Act, 2017.

8.5.1 Principal Commissioner, GST Policy Wing informed that in cases where the Appellate Authority/Appellate Tribunal/Court held that the notice under sub-section (1) of Section 74 of CGST Act, 2017 was not sustainable for the reason that the charges of fraud or wilful misstatement or suppression of facts to evade tax had not been established against the person to whom the notice was issued and directed the proper officer to determine the tax payable by such person deeming the notice to be issued under sub-section (1) of Section 73 of CGST Act, 2017, field formations were seeking clarification regarding the time limit within which the proper officer was required to re-determine the amount of tax payable considering notice to be issued under sub-section (1) of Section 73, specially in cases where the time limit for issuance of order as per sub-section (10) of Section 73 was already over. Doubts had also been expressed regarding the methodology for computation of such amount payable by the noticee. deeming the notice to be issued under sub-section (1) of Section 73.

8.5.2 The Law Committee deliberated on the issue and recommended issuance of a circular for clarifying the doubts. The draft Circular had been placed as annexure to the detailed agenda note.

8.5.3 The Hon'ble Member from Madhya Pradesh stated that they agreed with the Circular. He further informed that as per existing provisions of the Act, there were different time limits to issue notices under Sections 73 and 74 respectively and that many cases were being unearthed due to advanced techniques of Data Analytics and various GST related portals and accordingly to protect the revenue interest of the state, tax administration was issuing many notices under Section 73 . Keeping those circumstances into consideration, the time limit for issuing notices under Section 73 needed to be increased from present time limit of 3 years to 5 years, as had been prescribed for Section 74.

The Council agreed with the recommendation of the Law Committee made in agenda item 7(v), along with the proposed Circular.

8.6 Agenda Item 7 (vi): Amendment in the CGST Rules. 2017

8.6.1 Principal Commissioner, GST Policy Wing informed that in the Officers' meeting, there was a general agreement on proposed amendments in respect of various Rules except on the proposal regarding deletion of clause (d) of sub-rule (14) of Rule 138 of CGST Rules. He further informed that States of Tamil Nadu, Punjab, Rajasthan, Maharashtra, Delhi, Kerala and Chhattisgarh had expressed reservation on the proposal to delete clause (d) of sub-rule (14) of Rule 138 of CGST Rules and therefore, it was recommended that the agenda in respect of deletion of clause (d) of sub-rule (14) of Rule 138 of CGST Rules, 2017 might not be considered for approval.

He also informed that pari materia changes would also be required in the respective SGST Rules. He then proceeded to discuss various proposals in the agenda in detail.

I. Amendment in sub-rule (3) of Rule 12

8.6.2 Principal Commissioner. GST Policy Wing informed that references had been received from trade that there was no option available for an e-commerce operator having TCS registration to apply for cancellation of TCS registration in case of the closure of the operations of e-commerce operator. It has been requested to provide an option to cancel TCS registration. Similarly, there was also no option presently for a TDS registrant to apply for cancellation of TDS registration.

8.6.3 The Law Committee deliberated on the issue and recommended for amendment in sub-rule (3) of Rule 12 to provide an option to the TCS and TDS operators to apply for cancellation of their registration.

The Council agreed with the recommendation of the Law Committee.

II. Amendment in sub-rule (1) of Rule 37

8.6.4 Principal Commissioner, GST Policy Wing informed that the secondproviso to Section 16 (2) of the CGST Act, 2017 provides for cases where a recipient fails to pay to the supplier the amount towards the value of supply along with tax payable thereon within a period of 180 days.

8.6.5 He mentioned that such recipients had to follow the procedure prescribed in Rule 37(1) of the CGST Rules, 2017. However, the said Rule had been amended with effect from 01.10.2022 vide Notification No. 19/2022 - CT dated 28.09.2022 and the amended Rule 37(1) required the said recipient to pay an amount equal to the input tax credit availed in respect of such supply. That gave an impression that the whole of 1TC pertaining to such supply was to be reversed even though a part of the payment could have been made by the recipient to the supplier. That appeared to be an inadvertent departure from the principle of proportionate reversal under the original rule. To rectify the anomaly, the Law Committee recommended that sub-rule (1) of Rule 37 be amended retrospectively with effect from 01.10.2022 to provide for reversal of an amount of input tax credit proportionate to the amount not paid by the recipient to the supplier vis a vis the invoice value.

The Council agreed with the recommendation of the Law Committee.

III. Insertion of Rule 37A

8.6.6 Principal Commissioner, GST Policy Wing informed that sub-section (2) of Section 41 of the CGST Act, 2017, as substituted by Notification No. 18/2022-CT, provides for reversal of input tax credit availed by recipient of such supplies where tax payable has not been paid by supplier and re-availment of the said ITC after payment of tax by the said supplier. The Law Committee had deliberated the manner in which such ITC could be reversed and re-availed and after considering the various practical issues in the implementation of the said provision and for ease of doing business, the Law Committee recommended insertion of a new Rule 37A in CGST Rules, 2017 detailing out the mechanism for such reversal of credit and re-availment thereof. Principal Commissioner, GST Policy Wing stated that while there was agreement on this agenda in Officers' Committee meeting, a suggestion was made by State of Bihar that GSTN may provide a functionality for making the data pertaining to Rule 37A available to the tax officers and the same was agreed to.

The Council approved the recommendation made by the Law Committee.

IV. Amendment in Rule 46

8.6.7 Principal Commissioner, GST Policy Wing informed that in case of supply of services to unregistered persons through online platforms, in particular, recipients' addresses were not properly captured, which affected flow of revenue to the appropriate destination states.

8.6.8 Law Committee had deliberated on that issue and recommended insertion of a proviso to clause (f) of Rule 46 of CGST Rules, 2017 to ensure mandatory recording of address of unregistered recipients of service along with the PIN code when the said services were provided through online platform by a registered person even if the value of taxable supply was less than fifty thousand rupees.

8.6.9 The Hon'ble Member from Telangana welcomed the amendment to the tax invoice rules under Rule 46, but he stated that they had some concerns on the said issue especially in relation to Telecom sector. He added that in case of telecom services, the addresses of consumers were not provided by telecom operators to their distributors such as PhonePe. Paytm. BillDesk etc. He further stated that when the consumers purchased data from the said distributors, those distributors were not allowed to collect the address and the operators did not provide those details to distributors due to TRAI Rules. The Hon'ble Member stated that the TRAI Rules neither allowed the collection of details of addresses nor did that allowed sharing of addresses. He added that the State of Telangana received about Rs. 600 crore on such business transactions and therefore, requested intervention of the Council to address the issue. The Hon'ble Member further cited the example of BillDesk. which was a payment gateway and distributor fortelecom, who had declared the Place of supply as their State for last 5 years (July, 2017 - April. 2022) and he stated that after much persuasion the telecom operators had shared the State of consumer and thereafter. Bill Desk, started paying 1GST from May, 2022 onwards. He submitted that the State was then receiving Rs. 8 crore per month from the tax payer. Therefore, he emphasized that there might be cases of similarly placed taxpayers in the State. The Hon'ble Member requested GSTN and Law committee to take note of that issue and to come up with some rectification/clarification.

8.6.10 The Secretary clarified that the present proposal in the agenda item was to take care of such cases and that after the amendment proposed in that agenda item, the name, address and other details of recipient i.e. user would be required to be provided by the supplier of services on the tax invoice if the services were rendered through online platform.

The Council agreed with the recommendation of the Law Committee.

V. Amendment in Rule 46A

8.6.11 Principal Commissioner, GST Policy Wing mentioned that Rule 46 of the CGST/SGST Rules, 2017 prescribes the particulars that a tax invoice issued by a registered person should contain and Rule 49 of the said Rules prescribes the particulars that are to be included in a bill of supply issued by a supplier. Rule 54 of the said Rules further prescribes the particulars in respect of tax invoices issued in special cases. Rule 46A of the CGST/SGST Rules provides that, notwithstanding anything contained in Rule 46 or Rule 49 or Rule 54. a registered person supplying taxable as well as exempted goods or services or both to an unregistered person may issue a single "invoice-cum-bill of supply" for all such supplies. It may be observed in this regard that the non-obstante clause in Rule 46A actually removes the obligation on the part of a registered person who is supplying taxable as well as exempted goods or services or both to an unregistered person to include the particulars as prescribed in Rule 46 or Rule 49 or Rule 54. as applicable, while issuing the single "invoice-cum-bill of supply".

8.6.12 The said issue was deliberated by the Law committee, and it was felt that Rule 46A needed to be amended accordingly to make that obligatory on the part of a registered person, who was supplying taxable as well as exempted goods or services or both to an unregistered person, to include the relevant particulars as prescribed in Rule 46 or Rule 49 or Rule 54, as applicable, while issuing a single "invoice-cum-bill of supply". The proposed amendment to Rule 46A is detailed in the agenda note.

The Council agreed with the recommendation of the Law Committee.

VI. Insertion of proviso in sub-rule (8) of Rule 87

8.6.13 Principal Commissioner, GST Policy Wing informed that in cases where bank fails to communicate the C1N details of taxes paid through e-payment mode to GST System for updating the Electronic Cash Ledger (ECL), the ECL of such taxpayers are updated next day on the basis of RBI e-Scroll file containing the successful payment made against the CINs as shared by banks with RBI. However, there is presently no provision in the CGST Rules. 2017 providing for such updation of ECL based on e-Scroll of RBI. In this regard, CAG has highlighted the need for
having a specific provision in law for updation of ECL on the basis of e-Scroll of RBI.

8.6.14 The issue was deliberated by the Law committee and in order to regularize the process of updating ECL of the taxpayer on the basis of e-Scroll data received from the RBI in the cases where payment has been received successfully but bank fails to share the signed CIN with GST System, the Law Committee had recommended for amendment of Rule 87 of CGST Rules by inserting a new proviso to sub-rule (8) of Rule 87 of the CGST Rules, 2017. The proposed amendment to Rule 87 is detailed in the agenda note.

The Council agreed with the recommendation of the Law Committee.

VII. Amendment in Rule 108 and Rule 109

8.6.15 Principal Commissioner. GST Policy Wing further mentioned that in terms of Section 107 (1) of the CGST Act, 2017, any person aggrieved by any decision or order passed by an adjudicating authority may appeal to the concerned appellate authority within three months from the date of communication of the said decision or order to such person. Similar provision exists under sub-section (2) of Section 107 of CGST Act to provide for filing appeal by an officer authorised by the Commissioner to the appellate authority within six months from the date of communication of the said decision or order.

8.6.16 Further, as per Rule 108 (3) of the CGST Rules, in respect of an appeal filed in terms of the provisions of Section 107 (1) of CGST Act, 2017, a certified copy of the decision or order appealed against is required to be submitted within seven days of filing the appeal in FORM GST APL-01 under sub-rule (1) of Rule 108. The date of filing appeal in case where certified copy is submitted within seven days of filing appeal is the date of issuance of provisional acknowledgement, otherwise it is the date of submission of the certified copy.

8.6.17 Similarly, Rule 109 (2) of CGST Rules, 2017 provides for requirement of submission of certified copy of the order appealed against within seven days of filing application in FORM GST APL-03 in terms of sub-section (2) of Section 107 of CGST Act.

8.6.18 Law Committee deliberated on the issue and observed that in GST regime, when an order which is appealed against is issued or uploaded by the adjudicating authority on the common portal, the same can be viewed by the appellate authority. Accordingly, the requirement of submission by the appellant of a certified copy of such an uploaded order to vouch for its authenticity, pales into insignificance considering that the order has been uploaded by the adjudicating authority using his Digital Signature Certificate and the same is available for viewing or downloading by the appellate authority on the portal. However, in cases where the decision or order has been passed manually and has not been uploaded on the common portal, the same is not available to the Appellate Authority on the common portal. In such cases, non-submission of the certified copy by the appellant restricts the Appellate Authority from entertaining the same.

8.6.19 Law Committee accordingly recommended that to provide clarity on the requirement of submission of certified copy of the order appealed against and the issuance of final acknowledgment by the appellate authority, an amendment might be made in sub-rule (3) of Rule 108 and in Rule 109 of the CGST Rules, 2017 and Form GST APL-02. The details of the same are provided in the agenda note.

The Council agreed with the recommendation of the Law Committee.

VIII. Insertion of Rule 109C

8.6.20 Principal Commissioner, GST Policy Wing informed that while Sections 107(1) & 107(2) of CGST Act, 2017 provide for filing of appeal before first appellate authority against decision or orders of adjudicating authority by aggrieved person or authorized officer respectively. However, there was no provision in the CGST Act/Rules for withdrawal of such an appeal either by aggrieved person or authorized officers.

8.6.21 The issue was deliberated by the Law Committee and it recommended insertion of Rule 109C in CGST Rules, 2017 to provide for withdrawal of appeal before the issuance of SCN or Order under Section 107 (11), whichever is earlier. Further, Law Committee recommended introduction of FORM GST APL-01/03W in CGST Rules, 2017, to enable the appellant to file application for withdrawal of appeal application.

The Council agreed with the recommendation of the Law Committee.

IX. Deletion of clause (d) of sub-rule (14) of Rule 138

8.6.22 The Principal Commissioner, GST Policy Wing informed the Council that in the Officers' meeting held on 16^th December 2022, the officers from the States of Tamil Nadu, Punjab, Rajasthan, Maharashtra, Delhi, Kerala and Chhattisgarh had expressed reservation on the proposal to delete clause (d) of sub-rule (14) of Rule 138 of CGST Rules. Accordingly, it was proposed that the agenda might not be considered by the Council for approval.

The Council did not take up this agenda item for consideration.

X. Amendment in entry (5) of Annexure appended to sub-rule (14) of Rule 138

8.6.23 Principal Commissioner, GST Policy Wing further informed that entry nos. 4 & 5 of the Annexure appended to clause (a) of sub-rule (14) of Rule 138 of the CGST/SGST Rules, 2017 exempt the generation of e-way bill for transportation of goods falling under Chapter 71 of First Schedule to the Customs Tariff Act, 1975, including imitation jewellery. In the interest of revenue, field formations had suggested to mandate requirement of generation of e-waybill for movement of consignments of imitation jewellery, an item which was prone to tax evasion. Further, security concerns associated with transportation of gold, silver and other precious metals are not applicable to the transportation of imitation jewellery.

8.6.24 Law Committee deliberated on the issue and recommended a modification in the entry No. 5 of the Annexure appended to sub-rule (14) of Rule 138 of the CGST Rules, 2017 so as to exclude imitation jewellery from the exemption from the generation of e-way bill for its movement.

The Council agreed with the recommendation of the Law Committee.

XI. Substitution of FORM GST REG-19

8.6.25 Principal Commissioner, GST Policy mentioned that Rule 22(3) of CGST Rules, 2017 provides for an order of cancellation of registration under FORM GST REG-19. The Form contains a list of options to choose from to bring out reason for cancellation of registration. However, it was felt that there could be more scenarios based on whether the reply to the show cause notice had been submitted or not and whether the concerned person had appeared for personal hearing or not to include more scenarios. Further, FORM GST REG-19 also provided for a table for "Determination of amount payable pursuant to cancellation", which may create confusion if no amount was filled in the said table by the officer.

8.6.26 The Law Committee deliberated on the issue and recommended that FORM GST REG-19 may be substituted to include a more elaborate list of options to clarify the order of cancellation and also to include certain other compliances due such as furnishing the pending returns and the final return. The Law Committee also recommended to remove the table for "Determination of amount payable pursuant to cancellation" from FORM GST REG-19.

The Council agreed with the recommendation of the Law Committee made in agenda item.

XII. Amendment in FORM GST REG-17

8.6.27 Principal Commissioner, GST Policy mentioned that under Rule 22(1) of CGST Rules, 2017, FORM GST REG-17 is regarding show cause notice for cancellation of registration. GSTN proposed that "Kindly refer to the supportive documents attached for case specific details. " may be added at the end of FORM GST REG-17. The Law Committee deliberated on this issue and has recommended incorporating the proposal made by GSTN at the end of FORM GST REG-17.

The Council agreed with the recommendation of the Law Committee.

XIII. Amendment in FORM GST DRC-03

8.6.28 Principal Commissioner, GST Policy mentioned that Circular No. 174/06/2022-GST dated 06.07.2022 prescribes the manner for re-credit of amount of erroneous refund deposited by the taxpayer, in terms of provisions of sub-rule (4B) of Rule 87 of CGST Rules, 2017 in electronic credit ledger using FORM GST PMT-03A. In this regard. GSTN had been requested to make certain amendments in FORM GST DRC-03 to include more options in the drop-down regarding cause of payment as detailed in the agenda note. GSTN had also been requested to develop an automated functionality for online transmission of intimation of payment of amount of erroneous refund through FORM GST DRC-03 to the jurisdictional proper officer for issuance of FORM GST PMT-03A for re-credit of amount so deposited by the taxpayer in his electronic credit ledger as prescribed under Circular No. 174/06/2022-GST dated 06.07.2022 in terms of provisions of sub-rule (4B) of Rule 87.

8.6.29 Accordingly, GSTN had proposed certain amendments in FORM GST DRC-03 before the Law Committee and after discussion, the Law Committee had recommended the requisite changes in FORM GST DRC-03 as detailed out in the agenda.

The Council agreed with the recommendation of the Law Committee.

8.7 Agenda Item 7(vii): Supplies by unregistered person and composition dealers through e-commerce operators

8.7.1 Principal Commissioner, GST Policy informed that the GST Council in its 47^th meeting held on 28^ttl-29^Ih June had given in-principle approval for relaxation in the provisions for supplies by unregistered person and composition dealers making supplies through e-commerce Operators (ECOs), as detailed in the agenda. The Council had also mandated Law Committee to work out the details of the scheme.

8.7.2 The Law Committee deliberated on the requisite legal changes required to implement the recommendations of the Council. It recommended that for unregistered persons. Notification may be issued under Section 23(2) of the CGST Act, 2017 for exempting unregistered persons from obtaining mandatory registration for supplying goods through e-commerce operators, subject to certain conditions. Further, two separate notifications needed to be issued under Section 148 of the CGST Act, 2017 for providing special procedure to be followed by the electronic commerce operators, one in respect of supplies of goods through them by unregistered persons and second, in respect of supplies of goods through them by composition taxpayers. Law Committee also recommended that FORM GSTR-8 might be amended for capturing the information of supplies made by unregistered suppliers through e-commerce operators by insertion of two tables in FORM GSTR-8. In addition, it also recommended that Rule 67(2) of CGST Rules, 2017 might be amended to clearly bring out that the details of TCS furnished by ECOs in FORM GSTR-8 shall be made available only to the registered suppliers, as the supplies by unregistered persons do not attract TCS. For composition taxpayers, to remove the condition restricting registered persons engaged in supplying through electronic commerce operators from opting for the Composition Levy, Law Committee recommended that clause (d) to sub-section (2) and clause (c) to sub-section (2A) of Section 10 of CGST Act, 2017 might be amended. Law Committee further recommended insertion of sub-section (IB) in Section 122 of CGST Act. 2017 providing for penal provisions in cases of violation of compliances on part of the e-commerce operators in respect of the supplies made by unregistered persons and Composition taxpayers through them. Further, Law Committee also recommended that considering the time required for development of requisite functionality on the portal as well as preparedness by ECOs, the implementation of scheme might be deferred to 01.10.2023.

8.7.3 The Hon'ble Member from Haryana stated that there was requirement for a validation on the portal that an unregistered supplier should not be able to get enrolment on the portal from more than one State. Principal Commissioner, GST Policy Wing clarified that GSTN would be requested to put such a validation on the portal, so as to ensure that an unregistered person does not get enrolled in two or more States.

The Council agreed with the recommendation of the Law Committee along with the draft Notifications.

8.8 Agenda Item 7(viii): Amendments in the CGST Act. 2017

A. Amendment in second proviso to Section 16 of CGST Act to align with GSTR-1/3B

8.8.1 Principal Commissioner, GST Policy Wing mentioned that in the 42^nd GST Council meeting, held in October 2020, it was recommended that the GST laws be amended to make the present GSTR-1/3B return tiling system as the default return filing system. Accordingly, amendments were carried out vide the Finance Act, 2022 and were notified w.e.f. 01.10.2022. In this regard. Law Committee observed that 2nd and 3rd provisos to Section 16(2) also require amendments in order to align with the GSTR-1/2B/3B return tiling system as detailed in the agenda.

The Council agreed with the recommendation of the Law Committee.

B. Amendment to Section 23 to provide overriding effect over Sections 22(1) & 24

8.8.2 Section 22 of CGST Act, 2017 provides for persons liable for registration and Section 24 provides for compulsory registration in certain cases. On the other hand. Section 23 provides for persons not liable for registration and exemption of specified categories of persons from obtaining registration. However, existing Section 23 does not have any clause overriding the registration requirement imposed vide Section 24 and Section 22( 1). Therefore, it was discussed that doubts had arisen as to whether provisions of compulsory registration under Section 24 prevail over the exemption under Section 23.

8.8.3 Accordingly, the Law Committee deliberated on this issue and recommended that to avoid any conflict within the said provisions and to provide more clarity. Section 23 may be amended retrospectively w.e.f. 01.07.2017 as detailed in agenda.

The Council agreed with the recommendation of the Law Committee.

C. Amendments in CGST Act, 2017 to restrict filing of returns/statements after completion of specified time in view of data archival policy

8.8.4 Principal Commissioner, GST Policy mentioned that GST System has completed more than five years. GSTN has informed that the huge data size of all these years is putting an excessive load on the server and compromising performance. Keeping massive data available online slows down the GST system applications and impacts return tiling, especially during peak filing days. Therefore, GSTN proposed a data archival policy for the smooth functioning of the GST Portal and also to provide superior experience to the taxpayers.

8.8.5 While deliberating on the proposed data archival policy for GST portal, the Law Committee recommended that the maximum time limit for filing returns/statements be fixed as three years beyond the due date of filing and accordingly. CGST Act, 2017 be amended by inserting sub-section (5) in Section 37 and sub-section (11) in Section 39 of the CGST Act. 2017. Law committee also recommended inserting sub-section (2) in Section 44 and sub-section (15) in Section 52 of the CGST Act, 2017.

The Council agreed with the recommendation of the Law Committee.

D. Proposal for amendment of sub-section (6) of Section 54 of CGST Act, 2017

8.8.6 Sub-section (6) of Section 54 of the CGST Act, 2017 provides for provisional refund of ninety percent of the total amount claimed as refund on account of zero rated supplies of goods or services or both excluding the amount of input tax credit provisionally accepted. The concept of'provisionally accepted input tax credit' was related to the GSTR-1 -2-3 system of return filing which was never implemented. However, in the absence of implementation of GSTR-1-2-3 system of return filing, it was clarified vide para 2.0 of Circular no 24/24/2017 -GST dated 21.12.2017 that provisionally accepted input tax credit would be sanctioned upon obtaining an undertaking in relation to Sections 16(2)(c) and 42(2) of the CGST Act, 2017. Further. Section 41 of the CGST Act, 2017 provided for availing eligible input tax credit as self-assessed in the return on a provisional basis in terms of GSTR-1-2-3 system of return filing, has been amended in Finance Act, 2022 w.e.f. 01.10.2022 by doing away with the provision of availment of input tax credit on a provisional basis.

8.8.7 Accordingly, it was proposed that as the provision relating to availment of input tax credit on provisional basis has been done away with, the words "excluding the amount of input tax credit provisionally accepted," in sub-section (6) of Section 54 of the CGST Act might be omitted. The Law Committee deliberated on this issue and recommended the proposed amendment in sub-section (6) of Section 54 of the CGST Act.

The Council agreed with the recommendation of the Law Committee.

8.9 Agenda Item 7(ix): Amendment in the tables of GSTR-1 for reporting ECO Supplies made under Section 9(5) of CGST Act and attracting TCS under Section 52 of CGST Act . 2017.

8.9.1 Principal Commissioner. GST Policy Wing mentioned that as per current notified format of FORM GSTR-1, the supplies made by a registered person through e-commerce operators (ECOs) attracting TCS under Section 52 of CGST Act, 2017 are to be reported in various tables of FORM GSTR-1 i.e. 4C, 5B, 7A(2), 7B(2), 10A(1) & 10B(1). The details are to be provided invoice-wise and e-commerce operator-wise. However, these tables have not yet been made functional on GST Portal.

8.9.2 Further, amendment has been made in FORM GSTR-3B vide Notification no. 14/2022-Central Tax dated 05.07.2022 to provide that the taxable supplies made by the registered person through e-commerce operator, on which electronic commerce operator is required to pay tax under sub-section (5) of Section 9 of CGST Act, 2017, are required to be reported by both the registered persons as well as the e-commerce operators in their respective returns in FORM GSTR-3B. However, there is no separate table in FORM GSTR-1 to furnish the aforementioned details.

8.9.3 The issue was deliberated by the Law Committee which recommended certain changes in FORM GSTR-1 to capture details of the supplies made through e-commerce operators attracting TCS, as well as those on which e-commerce operator is required to pay tax under sub­section (5) of Section 9 of CGST Act, 2017. The changes recommended by the Law Committee in FORM GSTR-1 are enclosed as Annexure to the agenda note.

The Council agreed with the recommendation of the Law Committee in relation to FORM GSTR-1.

8.10 Agenda Item 7(x): Retrospective applicability of paras 7,8(a) and 8(b) of Schedule III of the CGST Act. 2017

8.10.1 Principal Commissioner. GST Policy Wing further mentioned that Para 7 of Schedule III to CGSTAct, 2017 provides that supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India, is an activity which is to be treated as neither supply of goods or services. Para 8(a) of Schedule III of CGST Act. 2017 provides that supply of warehoused goods to any person before clearance for home consumption will be treated neither as a supply of goods nor a supply of services. Similarly, as per Para 8(b) of Schedule 111 of CGST Act, High Sea Sales are to be treated neither as a supply of goods nor a supply of services. The said paras were inserted in Schedule III of CGST Act vide the Central Goods and Services Tax (Amendment) Act, 2018 and were made applicable vide Notification No. 02/2019-Central Tax dated 29.01.2019 with effect from 01.02.2019. The said notification was not made applicable retrospectively from 01.07.2017 which implies that before the said amendment of the CGST Act, such transactions were subject to GST. However, taxpayers were of view that amendment made in Paras 7, 8(a) & 8(b) of Schedule III to Central Goods and Services Tax Act, 2017 (CGST Act), all of which are activities to be treated as neither supply of goods or services, with effect from 01.02.2019, should be made applicable with effect from 01.07.2017. The detailed discussion is provided in the agenda.

8.10.2 Law Committee deliberated on this issue and felt that to avoid unnecessary litigation and doubts, there is a need to provide clarity in the GST law with respect of treatment of the transactions covered by Paras 7. 8(a) and 8(b) of Schedule III of CGST Act, 2017 for the period from 01.07.2017 to 31.01.2019, i.e. before the said paras were inserted in Schedule III of CGST Act. The Law Committee recommended that Paras 7, 8(a) and 8(b) in Schedule III should have retrospective effect w.e.f. 01.07.2017. The Law Committee also recommended that in cases where any tax has already been paid in respect of transactions/supplies covered under Paras 7, 8(a) and 8(b) of Schedule III of CGST Act during the period 01.07.2017 to 31.01.2019, no refund shall be available in respect of such tax paid.

The Council agreed with the recommendations of the Law Committee.

8.11 Agenda Item 7 (xi):- Mechanism to deal with differences in liabilities between GSTR-1 and GSTR-3B, along with draft rules and FORM DRC-01B for implementing the same.

8.11.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and stated that Law Committee had deliberated upon the ways to safeguard revenue by finding a mechanism for dealing with difference in liability reported in statement of outward supplies between FORM GSTR-I and FORM GSTR-3B. Further, he informed that the Law Committee felt that the mechanism should be based on system-based identification of the taxpayers based on certain approved risk criteria and a procedure of auto-compliance on the part of the taxpayers to explain/ take remedial action in respect of such difference. After deliberation, the Law Committee recommended that where the tax liability as per FORM GSTR-1 for a tax period exceeds the tax liability as per FORM GSTR-3B for that period by more than a specified extent, the registered person could be intimated on the portal of such difference and be directed to either pay the differential tax liability along with interest, or explain the difference and unless the taxpayer either deposits the amount specified in the said intimation or furnishes a reply explaining the reasons for any amount remaining unpaid, such a person should not be allowed to file FORM GSTR-1/ invoice furnishing facility for the subsequent tax period.

8.11.2 In this regard. Law Committee recommended insertion of a new Rule 88C in CGST Rules, 2017 for giving intimation to the taxpayer through the portal of difference in liability in FORM GSTR-1 and FORM GSTR-3B and to request payment of the differential liability or explain the difference. To begin with, it was recommended that difference between liability declared in FORM GSTR-1 & that declared in FORM GSTR-3B of more than 20% as well as more than Rs. 25 lakh may be taken for the purpose of intimation under proposed Rule 88C(1). Law Committee also recommended for insertion of FORM GST DRC-01B as required under Rule88C(l).

8.11.3 Further, Law Committee recommended insertion of a new clause (d) in sub-rule (6) of Rule 59 of CGST Rules, 2017 to enable blocking of FORM GSTR-I for a subsequent tax period unless the taxpayer has deposited the amount specified in the intimation or has furnished a reply explaining the reasons for any amount remaining unpaid.

8.11.4 It was further informed that Law Committee would be formulating a separate procedure for examination of such cases by the proper officer, where the taxpayer deposits the differential tax liability only partly, with or without an explanation for such short payment, and for further action for recovery of the unpaid amount in accordance with the provisions of Section 79, to the extent no satisfactory explanation has been provided by the taxpayer for such differential unpaid amount.

8.11.5 The Hon'ble Member from Haryana stated that the issue of FORM GST DRC-01B was also discussed in the Officers' Meeting. He thereafter stated that there is provision for blocking the filing of GSTR-1 if the differential amount involved is more than Rs. 25 Lakh and 20% and requested that the filing of GSTR-1 might be unblocked only after verification by the officer. He further stated that there may be scenarios wherein the filing of GSTR-1 for subsequent tax period could be allowed even if the taxpayer uploads a blank paper without proper details. He proposed that such cases should be verified by a GST officer as there may be a possibility that the registration can be used for claiming more Input Tax Credit in the later stages.

8.11.6 The Principal Commissioner, GST Policy Wing informed that as also explained in the agenda, a separate procedure would be worked out by the Law Committee for examination and verification of such cases by the tax officers, where the taxpayer deposits the differential tax liability only partly, with or without an explanation for such short payment, and for further action for recovery of the unpaid amount in accordance with the provisions of Section 79, to the extent no satisfactory explanation has been provided by the taxpayer for such differential unpaid amount.

8.11.7 The Hon'ble Chairperson stated that it would be desirable that verification by the officers should not be insisted upon at this stage for filing of GSTR-1 for the subsequent tax period and verification of the response of the taxpayer may be a separate exercise, as suggested by the Law Committee.

The Council agreed with the recommendation of the Law Committee.

8.12 Agenda Item 7(xii): Clarification on various issues in GST.

A. Clarification on taxability of No Claim Bonus offered by Insurance companies

8.12.1 Principal Commissioner, GST Policy Wing presented the agenda item before the council and stated that various representations had been received from General Insurance Council and various insurance companies seeking clarity on treatment of No Claim Bonus ('NCB') under GST. It had been represented that NCB is a discount given by insurance companies on the premium payable by the customer/insured for a particular year, if the insured has not made any claim during the previous year. However, some field formations/ investigation agencies were treating NCB as a supply by the customer to the insurance company.

8.12.2 Clarity was sought as to whether NCB is a consideration paid to the customer by the insurer for agreeing to the obligation to refrain from the act of lodging insurance claim during the policy period and therefore, tax would be payable by the insurance company on the gross amount without deducting NCB from the premium amount; or alternatively, whether it should be treated as a discount by insurance company, to be deducted from the gross premium, for the purpose of calculation of value of supply made by insurer to the insured.

8.12.3 The Law Committee had recommended that it might be clarified through a Circular that NCB is not a consideration in respect of any service rendered by the insured to the insurance company, rather it is an upfront discount from the premium payable by the insured for the supply of insurance services by the insurance company to the insured; and therefore, NCB is deductible for the purpose of calculation of value of supply of insurance services under Section 15 of CGST Act, 2017.

B. Clarification on applicability of e-invoicing with respect to an entity

8.12.4 Principal Commissioner. GST Policy Wing presented the agenda item before the Council and stated that Notification No. 13/2020-Central Tax dated 21.03.2020, as amended, provides the class of registered persons for whom e-invoicing shall be applicable under Rule 48(4) of the CGST Rules, 2017. SEZ units, government departments, local authority and those referred in sub-rules (2), (3), (4) and (4 A) of Rule 54 of the CGST Rules, 2017 have been exempted from e-invoicing.

8.12.5 Representations had been received from banking companies for clarifying the matter as banks were being subject to investigation by some tax authorities on grounds that c-invoices were required to be generated by banks for movement of goods, including bullion. Tax officers are also claiming that said exemption from generation of e-invoices is available to a banking company only with respect to the banking services provided by it and not for goods or for the Banking Company as a whole.

8.12.6 Law Committee had recommended that it could be clarified through a circular that the exemption from mandatory issuance of e-invoices is with respect to the entity as a whole and not just with respect to the nature of supply/transaction, so as to provide clarity to the trade and field formations and remove ambiguity on these issues.

The Council agreed with the recommendation of the Law Committee along with the draft Circular.

8.13 Agenda Item 7(xiii): Clarification regarding treatment of the difference in ITC availed in GSTR-3B as compared to that available in GSTR-2A for FY 2017-18 and 2018-12

8.13.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and stated that during the initial period of implementation of GST, especially during the financial years 2017-18 and 2018-19, many suppliers had failed to furnish the correct details of outward supplies in their FORM GSTR-1. Because of such discrepancies. FORM GSTR-2A of their recipients remained incomplete. However, the concerned recipients might have availed input tax credit on the said supplies in their returns in FORM GSTR-3B, as restrictions in availment of ITC up to certain specified limit beyond the ITC available to the registered persons as per FORM GSTR-2A were provided under Rule 36(4) of CGST Rules, 2017 only with effect from 9.10.2019.

8.13.2 Such discrepancies between the amount of ITC availed in FORM GSTR-3B and the amount available in FORM GSTR-2A of the registered person were being noticed by the tax officers during proceedings such as scrutiny/ audit/ investigation etc. and were being considered by them as representing ineligible ITC availed by the registered persons. Various representations had been received from the trade as well as the tax authorities, seeking clarification regarding the manner of dealing with such discrepancies.

8.13.3 The Law Committee had recommended that in cases where the difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a supplier for the said financial year exceeded Rs 5 lakh, the proper officer shall ask the registered person to produce a certificate for the concerned supplier from the Chartered Accountant (CA) or the Cost Accountant (CMA), certifying that supplies in respect of the said invoices of supplier had actually been made by the supplier to the said registered person and the tax on such supplies had been paid by the said supplier in his return in FORM GSTR 3B. Certificate issued by CA or CMA shall contain UDIN. In cases where difference between the ITC claimed in FORM GSTR-3B and that available in FORM GSTR 2A of the registered person in respect of a supplier for the said financial year was upto Rs 5 lakh, the proper officer shall ask the claimant to produce a certificate from the concerned supplier, to the effect that said supplies had actually been made by him to the said registered person and the tax on said supplies had been paid by the said supplier in his return in FORM GSTR 3B.

8.13.4 Law Committee had recommended issuance of a Circular for detailing the procedure for verification of ITC availed by the registered persons in such cases and for providing clarity to the trade and field formations.

The Council agreed with the recommendation of the Law Committee along with the draft Circular.

8.14 Agenda Item 7(xiv): Clarification regarding the treatment of statutory dues under GST law in respect of the taxpayers for whom the proceedings have been finalized under the Insolvency and Bankruptcy Code, 2016.

8.14.1 Principal Commissioner. GST Policy Wing presented the agenda item before the Council and stated that in cases where proceedings are initiated under Insolvency and Bankruptcy Code, 2016 (IBC) against corporate debtor, claims should be filed by the tax officers in respect of government dues pending against such person before the appropriate authority under IBC. On finalization of proceedings under IBC, the amount of government dues, payable by the said taxpayer, could be totally extinguished or could be reduced vis-a-vis the amount claimed by the tax officer. Doubts were being raised by tax authorities regarding the modalities for implementation of the order of the adjudicating/appellant authority under IBC, after finalization of the proceedings thereof, with respect to demand for recovery against such corporate debtor under CGST Act, 2017.

8.14.2 Law Committee deliberated on the issue and was of the view that in cases where a confirmed demand for recovery had been issued by the tax authorities for which a summary had been issued in FORM GST DRC-07/DRC 07A against the corporate debtor, and where the proceedings had been finalized against the corporate debtor under IBC reducing the amount of statutory dues payable by the corporate debtor to the government under CGST Act or under existing laws, the Jurisdictional Commissioner should issue an intimation in FORM GST DRC-25 reducing such demand, to the taxable person or any other person as well as the appropriate authority with whom recovery proceedings were pending.

8.14.3 Law Committee had recommended issuance of a Circular clarifying that the proceedings conducted under IBC also adjudicate the Government dues pending under the CGST Act, 2017 or under existing laws against the corporate debtor, therefore, the same are covered under the term "other proceedings' in Section 84 of CGST Act, 2017 and that in case the Government dues under the CGST Act, 2017 are extinguished or reduced in IBC proceedings, an intimation should be issued in FORM GST DRC-25 by Commissioner under Section 161 of CGST Rules, 2017 for reducing the said dues. Law Committee also recommended amendment in Rule 161 to align the same with Section 84 of the CGST Act, 2017 and also recommended that FORM GST DRC 25 be amended, to specifically include the authorities under IBC in the said form.

The Council agreed with the recommendation of the Law Committee.

8.15 Agenda Item 7(xv); Amendment in provisions related to OIDAR Services under the IGST Act. 2017.

8.15.1 Principal Commissioner. GST Policy Wing presented the Agenda item before the Council and stated OIDAR services are digitally supplied services, the nature of which renders their supply impossible in the absence of Information Technology. With the growth of digital economy, the OIDAR services are expected to grow immensely in volume and accordingly, more measures would be required to be taken in due course for improving compliance under GST for OIDAR services supplied by persons located in non-taxable territory.

8.15.2 To ensure compliance under GST by OIDAR service providers, the Law Committee opined that amendments were required in existing provisions of law so as to reduce the scope of interpretation for deciding whether the said supply is covered under the scope of OIDAR services or not for taxation under GST.

8.15.3 Law Committee deliberated on these issues and recommended amendment in the definition of "non-taxable online recipient" under Section 2(16) of the IGST Act, 2017. Currently, for a service to be classified as OIDAR services under Section 2(17) of the IGST Act, 2017, an essential condition was that the supply of such service must be essentially automated and should involve minimal human intervention. However, there was lack of clarity on the meaning of the term "minimal human intervention" and it was opined that restricting the scope of GST on cross border supply by non-resident suppliers only to those services with minimal human intervention did not provide a level playing field and also gave rise to legal disputes. In view of this. Law Committee recommended amending the definition of OIDAR services under Section 2(17) of the IGST Act, 2017 as detailed in the agenda.

The Council agreed with the recommendation of the Law Committee.

8.16 Agenda Item 7(xvi): In Section 17 of the CGST Act. 2017 regarding ITC in respect of CSR (Corporate Social Responsibility) expenditure.

8.16.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and stated that doubts had been raised by trade as well field formations in respect of availability of input tax credit on CSR expenditure incurred by companies in accordance with the provisions of Companies Act. 2013 due to various contradictory advance rulings. One view was that CSR expenditure is incurred to meet the obligations under section 135(5) of the Companies Act, and non-compliance on this count attracts penal action. Accordingly, input tax credit should be available in respect of inputs and input services for CSR activities in terms of Section 16(1) of CGST Act. However, another view was that CSR does not include activities undertaken in pursuance of normal course of business of the company and input tax credit should not be available to the registered person on CSR expenditure under Section 16(1) of CGST Act. Further, Explanation 2 to Section 37(1) of the Income Tax Act, 1961 provides that the expenditure incurred by an assessee on CSR activities shall not be deemed to be an expenditure incurred by the assessee for the purposes of business or profession.

8.16.2 Law Committee had recommended that ITC in respect of CSR expenditure incurred by Companies under section 135 of Companies Act may not be allowed. Further, it recommended that to unambiguously state such position, such CSR expenditure may be included in the list of blocked credits under Section 17(5) of the CGST Act, 2017.

The Council agreed with the recommendation of the Law Committee.

8.17 Agenda Item 7(xvii): Issues related to place of supply in terms of the proviso to Section 12(8) of the IGST Act, 2017.

8.17.1 Principal Commissioner, GST Policy Wing presented the agenda item before the Council and stated that Place of supply (PoS) of services by way of transportation of goods, including by mail or courier, where location of supplier and recipient is in India, is specified in Section 12(8) of the IGST Act, 2017. Further, Proviso to the section 12(8), inserted w.e.f. 01.02.2019, provides that where the transportation of goods is to a place outside India, the PoS shall be the place of destination of such goods, i.e. foreign country. Accordingly, IGST would be payable on the said supply. As the PoS is different from the location of the recipient of services in such cases, doubts are being raised in respect of the admissibility of input tax credit (ITC) to the recipient of such services.

8.17.2 Law Committee had recommended issuance of a Circular for clarifying that in such case ITC would be available to the registered person located in India, in respect of such receipt of services of transportation of goods, where place of supply is outside India in terms of proviso to Section 12(8), subject to fulfilment of other conditions of Sections 16 and 17 of CGST Act, 2017. Also, PoS is to be declared in FORM GSTR-1 on the common portal under the State code "96- Foreign Country" (and not under "97-Other Territory").

8.17.3 Law Committee had also recommended omission of the proviso to Section 12(8) of IGST Act. 2017. as no useful purpose is being served by insertion of the proviso to Section 12(8) of IGST Act. 2017 w.e.f. 01.02.2019.

The Council agreed with the recommendations of the Law Committee.

9. Agenda Item 12: GST Data sharing with Ministries and Departments

9.1 The Secretary then presented Agenda No. 12 regarding Data Sharing with Ministries and Departments and requested Additional Secretary, DoR to brief the Council regarding the agenda.

9.2 Additional Secretary, DoR informed that the agenda was for sharing of the GST Data which masked individual taxpayer data for the benefit of the Centre and State Government Departments and Agencies. The view behind Data sharing was that a lot of services could be rendered if the GST Data i.e. both aggregated and dis-aggregated data was shared between the Centre/States' departments and agencies through API. He further informed that States had requested to share individual taxpayer data also in the officers meeting and that would be taken up later.

9.3 The Hon'ble Member from Punjab voiced his concern and sought clarification on how the GST data would be shared between different departments and agencies.

9.4 The Secretary clarified that the GST data would be mutually shared between the Centre/States' departments and agencies. The Hon'ble Member from Punjab agreed to the agenda after the clarification.

9.5 The Hon'ble Member from West Bengal enquired about the agencies with which GST data would be shared.

9.6 The Secretary clarified that the GST data would be shared among the Centre/State Departments and agencies.

9.7 The Hon'ble Member from Puducherry raised concerns about the leakage of GST Data in case the same was shared with multiple departments and agencies.

9.8 The Hon'ble Chairperson clarified that the GST data sharing would be with State and Central Government Departments and their agencies only.

9.9 The Hon'ble Member from Andhra Pradesh supported sharing of GST data base but requested for sharing of other data base from Income Tax Department, Customs and NHAI Toll Data base.

9.10 The Hon'ble Chairperson clarified that GST Council had authority to share State/Centre GST data but the data sharing of Income Tax and Customs was outside the purview of Council.

9.11 The Hon'ble Member from Delhi stated that both the Centre and State were performing survey and investigations. In situations when any investigation is going on in one state for example in Uttar Pradesh and any lead related to other states like Delhi emerges from that investigation, then this data might be shared between the States through GSTN. There should be a mechanism in GSTN that such references might be auto populated or through online mechanism.

9.12 The Secretary took the note of the suggestions from the Hon'ble Member from Delhi and stated that there should be a system to share GST data regarding surveys and investigations between States and Centre and States.

9.13 The Secretary stated that from the deliberations, we can infer that the agenda on data sharing has the approval of the Council.

The Council approved the agenda on GST Data sharing with Ministries and Departments.

10. The Hon'ble Member from Haryana requested to take agenda on GST Tribunal. He further stated that if that agenda was delayed, the GST Tribunal would not see light for another one year.

10.1 The Hon'ble Chairperson assured that the GST Council would meet at the earliest.

10.2 The Secretary stated that the meeting could be concluded as per request of many of the Hon'ble Members. In the meeting the Council had discussed Agenda Items 1,2,3,4,5,6,7 and 12. Since, there were requests to end the meeting by 01.30 p.m., the remaining agendas would be taken up in the upcoming meetings of the Council.

10.3 The Secretary thanked the Hon'ble Chairperson, Hon'ble MoS, Hon'ble Members and all officers for attending the 48^th meeting of the GST Council.