This article tries to refer to the agenda and minutes of 22nd GST Council Minutes and the proposed draft circular, sight of which has been lost and at the time of 22nd GST Council Meeting held on 6th October 2017, it was thought fit to bring Cross Empowerment in GST Regime. The agenda and minutes also throw light about why the draft notification was not approved.
1. Agenda for 22nd GST Council Meeting:
Agenda Note 9: Proposal for issuing notifications on cross-empowerment for ensuring single interface under GST
a) Proposed Notification for Cross Empowerment- The relevant Extract of the agenda is as follows:
The notifications on cross empowerment under the CGST Act, the SGST Act and the IGST Act along with the supplementary instructions, as suggested by the Single Interface Committee in its interim report, was placed before the GIC for approval in its 10th meeting on 28 September, 2017. The proposed notification on cross empowerment under the IGST Act creates exception for cross empowerment in cases where place of supply is under dispute as per the decision of the GST Council. The States, however contended that the issue of place of supply should be referred to the Council and that all three cross empowerment notifications under CGST, SGST and IGST Acts may be taken together in the next GST Council Meeting.
b) Why it was felt necessary to bring in the notifications for Cross Empowerment- The relevant Extract of the agenda is as follows:
3. It is submitted that there is a broad agreement on cross empowerment under the CGST and SGST Acts. If notifications on cross empowerment are kept in abeyance for want of agreement on IGST Act’s cross empowerment, the effort to ensure single interface would be in vain. Taxpayers are increasingly feeling the heat of delay in grant of refund. If they are required to approach both Central and State Tax Authorities for refund of unutilized input tax credit for exports, it would further accentuate their grievances
4. Therefore, it is proposed that notifications on cross empowerment, which have been prepared in accordance with the recommendations of the Council, be approved.
5. The three notifications at (Annexure-I) for the consideration and approval of the Council.
c) How did the draft Notification sought to bring in cross-empowerment- The draft notification sought to bring in cross empowerment as follows: The copy of the draft notification is reproduced as hereinbelow:Agenda-for-22nd-Meeting-and-Draft-Notification
It can very well be seen that there were specific provisions for Section 67, 129, 130, All proceedings against a supplier or recipient of goods or services or both, who has remained un-registered although liable to be registered, Chapter XX and all matters other than ones mentioned.
Further, there was also ratification to assignment of taxpayers done between Centre and States which till today due to want of notification has not been authorized under any section of GST. The draft notification clearly provided that Assignment of registered persons refers to the distribution of registered persons between the central and state tax administrations, for exercising all administrative controls regarding enforcement of the provisions of the CGST Act, in such proportions and following such methods, as the Council may decide from time to time.
There was also a mechanism proposed for information regarding intimation to furnished by the Commissioner to the jurisdictional Commissioner of the respective State Goods and Service Tax Act or the Union Territory Goods and Services Tax Act or vice versa on common portal or manually with due acknowledgement till such time the facility for uploading the said information is not available on the common portal.
This clearly shows that intent at that time was to bring in notification for clearly specifying cross empowerment and it was believed that without such notification cross empowerment was not be possible. The draft notification was sought to be issued under section 6 of CGST Act, 2017 and also referred to the assignment of the taxpayers between Centre and State. The question is why then the notification was not approved. For this we have to refer to the minutes of the Council Meeting wherein this agenda was placed so as to know whether there was any change of opinion or any other hurdle due to which the draft notification could not be brought and only notification relating to refund processing was brought.
2. Council Minutes for 22nd GST Council Meeting-
a) Disagreement between the States with regard to the Place of Supply Rules- The relevant Extract of the minutes of the meeting are as follows:
The Commissioner (GST Policy), CBEC stated that it was proposed to issue notification on cross-empowerment prepared in accordance with the decisions of the Council taken during its 9th Meeting (held on 16 January 2017) and 21st Meeting (held on 9 September 2017). He stated that while there was a broad agreement for cross-empowerment under the CGST and SGST Acts, there was disagreement on the issue of cross-empowerment under the IGST Act in relation to the Place of Supply Rules.
b) Cross Empowerment was urgently required to enable for early grant of refund- The relevant Extract of the minutes of the meeting are as follows:
The Secretary stated that notification of cross-empowerment was urgently required to enable refund to the taxpayers and this notification could be issued.
It can be seen that cross-empowerment notifications were required to enable refund to the taxpayers. Had provisions of Section 6(1) been self sufficient and issuance of notification was only required to restrict the power of the officers only to Section 54 and 55 and not extend to Rule 96(IGST Refund), there would been no requirement for such urgency. As also there was no way that IGST Refunds would have come to SGST Officials since there was no mechanism neither at that time and nor till date that IGST Refunds can be applied to SGST or even to CGST Officials. Therefore, thinking at that time was that cross-empowerment notifications are required to enable processing of refund and not to restrict the powers of the SGST Officials.
c) Notifications for Cross Empowerment for other matters could be deferred as there are differences over place of supply rules- The relevant Extract of the minutes of the meeting are as follows:
He added that due to persistent differences on cross-empowerment for the Place of Supply Rules issues under IGST, notification regarding cross-empowerment in respect of other matters could be deferred.
This clearly brings out that notification for cross empowerment was thought necessary at that time as well but since there was differences over place of supply rules, therefore notification for refunds were issued and rest were kept on hold until the differences were resolved.
d) Consensus over issuing notification for Cross Empowerment in case of issue of refund- The relevant Extract of the minutes of the meeting are as follows:
He stated that by cross-empowering States and Central tax officers for giving refund, it would be ensured that only one officer issued an order of refund for both CGST and SGST. The Council approved the proposal to issue a notification by the Central Government and the State Governments cross-empowering officers of the Central and State Government to sanction refund and that an order of refund passed by an officer of the Central or State Government shall cover both the central tax and the state tax and a similar notification to be issued under the IGST Act.
e) What was approved for Agenda 9 of the Council Meeting- The relevant Extract of the minutes of the meeting are as follows:
For agenda item 9, the Council approved the following:
i) To issue notifications by the Central Government and the State Governments, cross-empowering officers of the Central and State Governments to sanction refund and that an order of refund passed by an officer of the Central or State Government shall cover both the Central tax and the State tax. Similar notification to be issued under the IGST Act by the Central Government;
ii) Until the division of taxpayers is effected between the Central and State administration, an officer of the Central and the State Government was authorised to process any refund claim filed by an applicant under his jurisdiction subject to a declaration being given by the applicant that the same refund claim has not been claimed from the other administration having jurisdiction over the applicant.
This again talks only about enabling cross empowerment for sanction of refund and not for restricting the powers to issue refund.
3. Conclusion– The above agenda and the council minutes throws light on many issues and how the provisions of section 6 were though to be implemented for cross empowerment and why they were not brought in as perceived. Any subsequent change in interpretation might be seen in light of the discussion in 22nd GST Council Meeting.