The Goods and Services Tax (GST) Council, in its 49th meeting on Saturday, approved the creation of a national tribunal mechanism with state benches for the redressal of disputes, cleared pending compensation dues and announced new taxation rates for items, such as pencil sharpeners, rab (liquid jaggery), along with measures to plug evasion in tobacco products.
Regarding pending compensation dues to states, the government cleared the balance of Rs 16,982 crore for June 2022. Additionally, it cleared the admissible final GST compensation to six states/UTs — Delhi, Karnataka, Odisha, Puducherry, Tamil Nadu, and Telangana — who have provided the revenue figures as certified by the Accountant General of the states amounting to Rs 16,524 crore.
“AG certificate authorisation is required for the clearance or the payment of the money. But awaiting the AG certificate, it doesn’t mean we don’t release anything at all. Nearly 90 per cent of the compensation as a provisional amount is released to the states, and 5-8 per cent is retained subject to the AG’s certificate reaching us,” Finance Minister Nirmala Sitharaman said in a media briefing after the Council meeting.
The AG certificate is pending for all years beginning 2017-18 for states including Kerala, West Bengal, Uttar Pradesh, Madhya Pradesh, and Punjab, an official release said. Revenue Secretary Sanjay Malhotra noted that the pending compensation amount was Rs 34,000 crore, of which 50 per cent was already paid. “50 per cent we are releasing now (Rs 16,524 crore for six states/UTs). 50 per cent was already released, that’s Rs 16,982 crore. This is among 23 states and would be from the funds of the central government, and later on, it would be recouped as and when the amount is received in the compensation fund the next year,” Malhotra said.
The Council accepted recommendations of reports of two Groups of Ministers (GoMs) — ‘GoM on Capacity Based Taxation and Special Composition Scheme in Certain Sectors on GST’ and ‘GoM on GST Appellate Tribunal’.
The setting of an appellate tribunal mechanism paves the way for dispute redressal on a national and state-level basis for the first time after the GST rollout in July 2017. “GoM reports have been accepted. One, slightly with modification and with the understanding that one or two amendments in the language with which it will be brought into the (Finance) Bill,” Sitharaman said, adding that the first draft for feedback will be shared with states on Sunday, following which a final draft will be circulated to states.
The Council has authorised the chairperson to take the final view and incorporate it in the Finance Bill since there is not much time for the Council to meet again, she added.
States are learnt to have raised concerns about the initial GoM recommendations for a national-level tribunal with one judicial and one technical member and a selection committee comprising only representatives from the Supreme Court. After at least a dozen states flagged the inadequate representation of states in the tribunal composition in the Council meeting, the final decision veered towards expanding the bench strength to two judicial members and two technical members, with a senior judicial member of the state high court in the selection panel, a state finance minister said.
“The original recommendation of the GoM had significant resistance. What I have not seen till now, by my count, about 13 states felt that we should have state tribunals not just a national tribunal…lots of clarifications were given, the revenue secretary explained a lot of things. The convenor of the GoM, Deputy CM of Haryana also made a lot of suggestions for improvement…concerns of many states were addressed both in terms of the composition of the tribunals as well as of the selection committee that would create such tribunals. I would say that of course the devil is in the details, we are expecting some written documentation in the next few days,” Tamil Nadu Finance Minister Palanivel Thiagarajan said.
The Revenue Secretary said that there will be one tribunal with a principal bench and as many Benches will be located in a state. “They will be named as state benches. For a particular state bench, all judicial and technical members will be from that state,” he said.
For taxation on pan masala, gutkha and other tobacco products, the Council approved that factories will not be taxed based on their manufacturing capacity and compliance, and tracking measures will be taken to plug leakages. A compensation cess will be levied on such commodities as a tax-based levy rather than ad valorem.
GST rates were reduced for items, such as pencil sharpeners from 18 per cent to 12 per cent and rab (liquid jaggery) from 18 per cent to 5 per cent if sold prepackaged and labelled, and nil when sold loose. The Council also exempted educational institutions and central and state educational boards from conducting entrance examinations through any authority, including National Testing Agency. Also, the Council approved an amnesty scheme for conditional deemed withdrawal of assessment orders in past cases and rationalisation of late fees for annual returns.
Union Finance Minister Nirmala Sitharaman on Saturday. Express photo by Prem Nath Pandey 
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