35th GST Council Meeting — New FM's First & NAA Extension

The 35th meeting (June 21, 2019) was the FIRST GST Council meeting chaired by Nirmala Sitharaman, who became Finance Minister on May 31, 2019: CONTEXT: (1) Arun Jaitley had chaired all 34 previous meetings since GST Council formation in September 2016; (2) Jaitley was unwell (eventually passed away August 24, 2019); (3) Piyush Goyal had briefly held interim charge; (4) Sitharaman inherited a system facing: revenue shortfall, compliance fatigue, states demanding compensation, pending return simplification. WHAT SHE SIGNALED AT 35TH MEETING: (1) 'Simplification over disruption' — no major rate changes, focused on compliance ease; (2) Extended deadlines for annual returns (acknowledged filing difficulties); (3) Maintained consultative approach with states; (4) Continued Jaitley's consensus-building tradition. HER SUBSEQUENT IMPACT: Under Sitharaman (35th meeting to 55th+), the Council: (1) Completed e-invoicing rollout (₹100 Cr → ₹5 Cr threshold); (2) Navigated COVID-19 crisis (3 virtual meetings); (3) Resolved ₹2.69L Cr compensation shortfall; (4) Managed online gaming taxation controversy (28%); (5) Oversaw revenue growth from ₹97K Cr/month (2019) to ₹1.8L Cr/month (2025). Sitharaman is now the LONGEST-SERVING GST Council chair (7 years and counting).

NAA is the watchdog ensuring businesses PASS ON GST rate cut benefits to consumers: WHY NAA EXISTS: When GST rates are reduced (e.g., 28% → 18% on a product), businesses MUST reduce MRP proportionally. Some businesses pocketed the tax savings without reducing prices — NAA catches and penalizes them. POWERS: (1) Investigate complaints of profiteering; (2) Order price reduction/refund to consumers; (3) Impose penalty (profit amount + 10%); (4) Cancel GST registration (extreme cases). WHY EXTENDED AT 35TH MEETING: (1) Originally set for 2 years (Nov 2017 — Nov 2019); (2) 170+ cases still pending investigation; (3) Major builders found guilty (DLF, Pyramid Infratech — didn't reduce flat prices post-rate cut); (4) FMCG companies under investigation (HUL, P&G for not reducing product prices); (5) States supported extension unanimously. KEY NAA CASES (2017-2021): (1) DLF Ltd: ₹7 Cr profiteering in Gurugram flats — ordered to refund; (2) Hindustan Unilever: ₹383 Cr allegation on Dove, Pears, Lux soaps — partially upheld; (3) McDonald's India: ₹7.49 Cr — didn't reduce meal prices post-28%→5% cut; (4) Pyramid Infratech: ₹4.25 Cr — flat buyers refunded. NAA was eventually replaced by CCI (Competition Commission of India) from December 2022, which now handles anti-profiteering alongside antitrust matters.

The 35th meeting discussed transitioning from GSTR-1/3B to a new system (ANX-1/ANX-2/RET-1): CURRENT SYSTEM (as of June 2019): (1) GSTR-1: Outward supply details (sales) — filed by 11th of next month; (2) GSTR-3B: Summary return with tax payment — filed by 20th of next month; (3) Problems: Two separate filings, no invoice matching, ITC claimed without verification, facilitates fake ITC fraud. PROPOSED NEW SYSTEM: (1) ANX-1 (Annexure of Outward Supplies): Replace GSTR-1. Real-time or near-real-time upload of invoices. Machine-readable format; (2) ANX-2 (Annexure of Inward Supplies): Auto-populated from sellers' ANX-1. Buyer ACCEPTS, REJECTS, or marks PENDING each invoice. Solves ITC matching problem; (3) RET-1 (Monthly Return): Replace GSTR-3B. Auto-calculated from ANX-1 and ANX-2. One consolidated filing. TIMELINE DISCUSSED AT 35TH MEETING: (1) July-Sep 2019: GSTN develops system; (2) October 2019: Trial for large taxpayers (₹5 Cr+ turnover); (3) January 2020: Trial for all taxpayers; (4) April 2020: Mandatory migration. WHAT ACTUALLY HAPPENED: System was repeatedly deferred. COVID killed it. By 2022, government quietly abandoned ANX/RET in favor of enhancing existing GSTR-1/3B with auto-populated GSTR-2B (which essentially achieves what ANX-2 was supposed to do — auto-populated inward supply with accept/reject).

Anti-profiteering mechanism explained with real examples: HOW TO CALCULATE PROFITEERING: (1) Product MRP: ₹100 (inclusive of 28% GST); (2) Base price: ₹78.13 (100/1.28); (3) GST reduced to 18% → new price should be: ₹78.13 × 1.18 = ₹92.19; (4) If company keeps selling at ₹100 → profiteering of ₹7.81 per unit. HOW CONSUMERS CAN COMPLAIN: (1) File complaint at www.naa.gov.in (NAA portal); (2) Approach local Standing Committee (state-level); (3) Submit proof: old bill (showing higher rate) + new bill (showing same/similar price despite rate cut); (4) NAA/Standing Committee investigates. REAL CASES: (1) Cinema halls: When entertainment tax merged into GST at lower effective rate — many multiplexes didn't reduce ticket prices. Mumbai NAA ordered PVR to pass benefits; (2) Restaurants: When rate cut from 18% to 5% (Nov 2017) — many restaurants reduced prices but removed 'service charge' option, effectively no benefit. Investigated but harder to prove; (3) Real estate: BIGGEST profiteering sector — builders had pre-GST bookings at 12% VAT+4.5% ST (16.5% effective). When GST came at 12% (and later 5%), they didn't reduce flat prices proportionally. Over ₹500 Cr in profiteering orders against builders. CONSUMER TIP: Keep old invoices/bills. If a GST rate cut is announced and your product price doesn't decrease proportionally within 30 days — file a complaint.

The 35th Council clarified a contentious issue: can cinema halls claim ITC on food/beverages? THE DISPUTE: (1) Multiplexes (PVR, INOX, Cinepolis) sell food inside theatres at high margins (₹100 for popcorn that costs ₹15 to make); (2) Question: Is food sold IN a cinema hall a 'restaurant service' (5% no ITC) or part of entertainment (18-28% with ITC)? (3) Cinema halls wanted to claim ITC on food supplies arguing it's part of their entertainment service. COUNCIL'S CLARIFICATION: SCENARIO 1 — Composite supply (food included in ticket price or bundled package): If a cinema offers 'combo' (ticket + popcorn + drink as single package), it's treated as composite supply. Principal supply = entertainment. GST on entire package = entertainment rate (18%/28% based on ticket price). FULL ITC available on food inputs. SCENARIO 2 — Separate supply (food sold at counter independently): If food is sold separately at the snack counter (customer buys ticket and food in separate transactions), it's restaurant service. GST on food = 5% WITHOUT ITC. Treated as independent supply. PRACTICAL IMPACT: (1) Multiplexes restructured offerings — introduced more 'combo packs' to claim ITC; (2) Revenue impact: A multiplex spending ₹2 Cr/year on food supplies saves ₹25-30L in ITC annually under composite supply treatment; (3) Consumer impact: Combo prices may be marginally better value than buying separately. NOTE: This became less relevant when gold-class/recliner ticket GST was later simplified, but the principle of composite vs mixed supply remains important across many industries.