01st GST Council Meeting

MINUTE BOOK

Minutes of the 1st GST Council Meeting (22nd and 23rd September 2016)

The first meeting of the GST Council (hereinafter referred to as ‘the Council’) was held on 22nd and 23rd September 2016 under the Chairpersonship of the Hon’ble Union Finance Minister, Shri Arun Jaitley in Vigyan Bhawan, New Delhi. The meeting was attended by the Hon’ble Union Minister of State for Revenue, Shri Santosh Kumar Gangwar, the Hon’ble Chief Minister of Puducherry, Shri V. Narayanasamy, the Hon’ble Deputy Chief Minister of Arunachal Pradesh, Shri Chowna Mein, the Hon’ble Deputy Chief Minister of Delhi, Shri Manish Sisodia and the Hon’ble Ministers from the other States. The meeting was also attended by the officials of the Centre and the States. The list of the Hon’ble Ministers who attended the meeting is at Annexure 1. The list of officers of the Centre and the States who attended the meeting is at Annexure 2.

2. In his opening remarks, the Chairperson of the Council observed that the political parties showed statesmanship in passing the historic taxation legislation in the Union Parliament and thereafter, the States also played an active role in ratifying it. He also thanked the Empowered Committee of the State Finance Ministers for playing an important role in reaching a broad consensus on GST. He observed that the Council has a very important constitutional responsibility to deal with all important issues relating to GST.

3. Five agenda points were taken up for meeting which are as follows:

• (i) Draft Rules of Procedures and Conduct of Business in Council
• (ii) Proposed timetable for the implementation of GST
• (iii) Thresholds for exemption and composition under GST
• (iv) Draft Modalities for GST Compensation and draft Compensation Law
• (v) Provisions for Cross-Empowerment to ensure Single Interface Under GST

4. Before taking up the agenda points, the Chairperson invited the Members of the Council to make general comments, if any. The following issues were highlighted –

• (i) The Hon’ble Minister from Kerala expressed that given the good experience with the Empowered Committee of State Finance Ministers during the last sixteen years, the institution of Empowered Committee should continue. After some discussion, it was decided that the decision regarding the continuance or otherwise of the Empowered Committee rested with the Empowered Committee. However, the forum for discussing and deciding all issues relating to GST shall be the Council.
• (ii) The Hon’ble Minister from Kerala observed that the Rules of Procedures and Conduct of Business in the Council should have a clause that decisions would be arrived at by consensus. The Chairperson observed that consensus was key to a forum where sovereignty is shared. However, we must provide for a possible scenario where voting can be resorted to in the absence of a consensus.

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Discussion on Agenda Items

Agenda Item 1: Draft Rules of Procedures and Conduct of Business in Council

5. The Additional Secretary, Department of Revenue presented the Draft Rules of Procedures and Conduct of Business in the Council. After discussion, the Rules were approved by the Council with the following amendments/observations –

• (i) Rule 2 – In the definition clause, the word “Chairman” be substituted by the word “Chairperson” in line with the expression used in Article 279A of the Constitution (One Hundred and First Amendment Act) of India.
• (ii) Rule 2 – A new clause 2(1)(iv) to be added to take care of a situation where a State is under President’s Rule. Clause (iii) only refers to Minister-in-charge of Finance or Taxation or any other Minister nominated by each State Government but there would be no Minister when a State is under President’s Rule (point raised by the Hon’ble Minister from Jammu and Kashmir). The Chairperson suggested a broad formulation, subject to legal vetting, namely that in a state where there is a proclamation under Article 356 of the Constitution of India, for the purposes of the Council, the person nominated by the Governor of the State shall exercise the power of a Minister.
• (iii) Rule 3(2) – The Hon’ble Minister from West Bengal observed that the detailed agenda notes were circulated only two days before the Council meeting, which left little time for their examination in the States. He suggested that the agenda be circulated at least 10-15 days in advance. The Chairperson observed that as there was a tight time-frame for implementation of GST, a 15-day notice along with agenda notes before every meeting could derail the deadline. It was agreed that a meeting notice along with agenda points shall be sent at least 7 days prior to the date of the meeting of the Council and the agenda notes would be sent at least 3 working days prior to the date of the meeting. The timelines could be revisited once GST was implemented.
• (iv) In respect to Rule 3, the desirability of holding meetings via video conferencing was suggested by the Hon’ble Minister from Tamil Nadu and discussed. Some members felt that it was an efficient way of conducting business where the agenda points might be very few whereas some others felt that chemistry of the group was important, especially during the initial stages when important issues were being discussed and this could be achieved only by a physical meeting. The Chairperson observed that the idea of video-conferencing could be explored at a later date, specifically in cases of meetings where the agenda points were few and required just a formal approval. Furthermore, the desirability of postal ballot was also discussed and it was decided that this was not required.
• (v) Rule 4 – The Hon’ble Minister from Kerala observed that a rule regarding order of seating of the members was not needed. The Chairperson agreed that Rule 4 should be deleted.
• (vi) Rule 5(2) – Some members observed that Rule 5(2) was too restrictive as a Minister nominated to the Council might not be able to attend a meeting due to some other pre-occupation. The Chairperson observed that the rule could be re-formulated to provide that where the

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originally nominated Member was unable to attend a Council meeting on account of some reason, another Minister could be nominated to attend a particular meeting of the Council. It was further agreed to amend Rule 5(2) to provide that in the absence of the Member Minister or another nominated Minister from a State, a nominated officer could also attend and speak in the meeting of the Council. However, he would not be allowed to vote. An officer accompanying a Minister could also speak on technical matters, if required.

• (vii) Rule 6 including its Heading – On the suggestion of the Hon’ble Minister from Mizoram, it was decided that the expression “Vice-Chairman” be replaced by the expression “Vice-Chairperson” in line with the expression used in Article 279A of the Constitution (One Hundred and First Amendment) Act.
• (viii) In Rule 6, the desirability of having a provision for withdrawal of nominations for the post of Vice-Chairperson of the Council was discussed and it was decided that a provision for this may be made in rules.
• (ix) In Rule 12, it was discussed whether, in respect of Rule 12(b) (to receive comments from the Members on a proposal circulated by a member seeking recommendation from the Council), a time-period be prescribed for receiving comments from the States and it was decided that it is for the Chairperson to give reasonable time and decide to put up the proposal before the Council with or without receiving comments from all or any State.
• (x) Rule 16 – The Hon’ble Minister from Tamil Nadu pointed out that the weightage of vote gave a veto to the Union Government. The Chairperson pointed out that this idea was first mooted in the Bhubaneswar Empowered Committee meeting in 2013 and it was now part of the Constitution. This provision compelled the Union and the States to come to a consensus. He also observed that there cannot be a situation where the Union Government gets excluded in decision-making relating to the taxation policy of the Union of India, which is not desirable. The Hon’ble Minister from Bihar observed that under the leadership of the Chairperson, a healthy convention should be developed of taking decision by consensus.
• (xi) In respect of Rule 16, the Hon’ble Ministers from Tamil Nadu and Uttar Pradesh suggested that there should be different weightage of votes for States within the two-third weightage of votes given to the States. The Hon’ble Minister from Tamil Nadu stated that States with a population of 20 crores and 1 crore should not be treated equally in terms of votes. It was pointed out that such an approach was followed for Rajya Sabha membership. Some criteria like population, GDP, revenue collected or Lok Sabha representation could be adopted to assign weighted votes to each State. The Hon’ble Minister from UP also endorsed this suggestion. This suggestion was objected to by several States. The Hon’ble Minister from Meghalaya stated that no inequality should be created between the States. The Hon’ble Minister from Assam also strongly opposed this suggestion and observed that each State played an important role in the Union and that a small State like Arunachal Pradesh contributed to ensuring the security of India. The Hon’ble Chief Minister of Puducherry too objected to this proposal. Most of the other States also supported the stand that all States should have an equal vote. The Chairperson pointed out that this issue was deliberated upon by the Select Committee of the Rajya Sabha while examining