Summary of Points Finalized in the Meeting

Approval of Draft GST, IGST, and GST Compensation Laws

The Council approved Chapters I–IX (Sections 1–46) of the Draft Model GST Law with several modifications and subject to legal vetting.

Jammu & Kashmir was allowed to exclude itself from GST implementation under Section 1(2), with the option to extend it later as per its Constitution.

The definition of “agriculture” was broadened to include floriculture, horticulture, sericulture, pisciculture, dairy farming, poultry farming, stock breeding, piggery, apiculture, etc.

Definitions of “agriculturist” in Sections 2(8) and 2(106) were merged for clarity.

The Council decided to include a clause in Schedule IV exempting certain statutory fees, user charges, and license fees related to state welfare.

“Intra-state supply of goods/services” and “manufacturer” definitions to be incorporated directly into the GST Law.

Works contract and restaurant services were categorized as composite supplies under “services”.

The term “location of recipient of service” to be added to the GST Law (not just IGST Act).

Rate Structure and Levy Provisions

The tax rate cap was increased from 14% to 20% (each for CGST and SGST).

Composition Scheme:

Now applicable to manufacturers and traders (earlier only for traders).

Turnover limit for eligibility to be not less than ₹50 lakh, as specified by the Council.

Rate of composition fixed at 1% (0.5% CGST + 0.5% SGST) for traders and 2% (1% CGST + 1% SGST) for manufacturers.

Availment of composition benefit to be based on self-declaration, not permission.

Capacity-based composition was rejected; turnover-based composition retained.

Reverse Charge Mechanism: Tax to be levied on all taxable supplies made by unregistered suppliers to registered persons (including composition dealers).

Input Tax Credit (ITC)

The time limit to make payment and claim ITC extended from 3 months to 6 months.

Decision on ITC for capital goods deferred until detailed data was received from CBEC.

Exemptions

The Council decided that exemptions under CGST, SGST, and IGST should be uniform across all three Acts.

Administrative and Compliance Provisions

Late Fee: Minimum late fee fixed at ₹5,000 or as recommended by the Council.

Tax Deduction at Source (TDS):

Threshold for TDS fixed at ₹2.5 lakh per contract.

“Governmental agencies” to be defined in the Act.

Time of Supply: Term “voucher” to be defined for clarity.

Registration: States raised concerns about technical issues during GST migration; GSTN assured corrective steps.

Cross-Empowerment for Single Interface under GST

Discussions were initiated on ensuring a single administrative interface under GST.

It was proposed that both Centre and States would be cross-empowered for audits and enforcement, with different audit ratios for taxpayers below and above ₹1.5 crore turnover.

Legal clarity sought regarding cross-empowerment under IGST, as levy and collection powers lie with the Centre under Article 269A.

In summary:
The 5th GST Council Meeting (2–3 Dec 2016) marked major progress with approval of the Draft GST Law (Chapters I–IX), finalisation of the Composition Scheme, rate cap at 20%, uniform exemptions, and initiation of discussions on cross-empowerment for single interface. The Council deferred decisions on ITC for capital goods and remaining law sections to the next meeting.