Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha on August 8, 2024. Photo: Sansad TV via PTI

The Union government has nothing to do with imposing the goods and services tax (GST) on health insurance premiums, Finance Minister Nirmala Sitharaman insisted in the Rajya Sabha on Thursday (August 8, 2024), maintaining that the issue is entirely in the realm of the GST Council, which includes representatives from all State governments.

“Before GST too, medical insurance premiums were taxed,” she noted, during her reply to a debate on the Finance Bill. The Upper House returned the Bill following her reply, completing the process of approving the Union Budget for this financial year.

Countering charges that the Centre is pocketing the GST on health insurance premium, Ms. Sitharaman accused the Opposition of trying to gain political points on the issue. “Let the GST Council take a call,” she said, adding that every State levied taxes on health insurance premiums.

‘Write to State FMs’

Noting that the GST Council has discussed the issue thrice in the past, she said that the Finance Ministers of all States were present in the GST Council where decisions are taken by consensus. MPs who were protesting the tax with placards in Parliament must instead write to Finance Ministers in their respective States. “What stopped you?” she asked.

Objecting to allegations that the GST on health insurance premiums is “daylight robbery”, the Finance Minister pointed out that 50% of the GST collected goes to the States, and out of the Centre’s 50% share as well, 41% is given to the States.

Opposition members had also raised Union Minister Nitin Gadkari’s letter to Ms. Sitharaman on the matter. Without naming Mr. Gadkari, she said that the Opposition had got an opportunity to raise the issue with “some Ministers” writing a letter, claiming that “somebody” who was part of a delegation had put it out in the public domain without the Minister’s permission.

Balancing priorities

Ms. Sitharaman reiterated that the Union Budget balances several overriding imperatives, including growth, employment generation, capital investment, and fiscal consolidation. “We have tried to balance all these without compromising on any one sector,” she said.

The allocation for agriculture and allied sectors has increased in this Budget, the Finance Minister said. “₹1.44 lakh crore was the allocation last year, this time it has gone up to ₹1.52 lakh crore, that is ₹8,000 crore more,” she added. Ms. Sitharaman also questioned the conclusions of the Global Hunger Index, claiming that the report had been prepared without proper data from India.

New Delhi: Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi, Saturday, June 22, 2024.

The story so far: On June 22, the GST council recommended introducing biometric-based Aadhaar authentication for GST registrations, in a phased manner. In a media interaction after the conclusion of the council meeting, Finance Minister Nirmala Sitharaman stated that the measures endeavour to combat fraudulent input tax credit (ITC) claims made through fake invoices. She highlighted that the measure was formalised based on “good inputs” received from pilot projects run in Gujarat and Puducherry, in addition to a study in Andhra Pradesh. This is soon expected to be implemented across India.

What fraud the measure is trying to mitigate?  

Input tax credit (ITC) claims are a means to reduce tax liability by indemnifying the tax already paid on inputs for the tax liability computed on the output. Let us say, a manufacturer pays Rs 120 as tax for purchasing certain inputs or raw materials for their business. Now, their direct tax liability – which is based on the production incurred, is Rs 300. This is where the manufacturer can make an ITC claim. Since s/he has paid a certain portion in taxes for the input procurement, the difference of Rs 180 would be the net payable tax. Rs 120 is offset by claiming ITC.  

Since the rollout of the GST regime, a large number of GST frauds involving the use of fake invoices to fraudulently avail an ITC claim, inflate turnovers and/or assist in money laundering have been observed. These frauds are facilitated with the use of fake invoices, that is, invoices generated without the actual supply of goods or services.

Central Board of Indirect Taxes and Customs (CBIC) in a 2019 office memorandum had noted three ways in which this was executed. The first is more direct, wherein the invoice is used, without receiving any goods or service, to show payment of tax. This is then used to avail an ITC claim translating to a loss for the exchequer.

The second entails issuing an invoice to one entity and the goods being diverted to some other entity. The purchaser in this case may actually not be involved in creating an output product or service – a prerequisite of an ITC claim. However, they too may avail a claim on their tax liability which could be unrelated to the transaction incurred. All in all, it may potentially entail shifting ITC from exempted supplies to taxable supplies. 

Finally, the last of these observed methods entails routing of invoices through a series of shell and/or dummy companies and transfer of ITC from one company to another in a circular fashion to increase the turnover. Again, there is no supply of goods or services but the credit is availed based on fake invoices. In such instances, utilising inadmissible credit alongside the utilisation of credit emanating from actual regular supplies results in a loss to the exchequer.

In May last year, CBIC had launched a drive against bogus registrations and issuance of fake invoices. Over a seven-month period since its initiation, the drive had detected a total of 29,273 bogus firms involved in suspected ITC evasion totalling to Rs 44,015 crore, a report in January 2024 noted. The CBIC further informed that the discovery translated to savings of Rs 4,646 crore, of which Rs 3,802 crore was because of the blocking of ITC claims. Rs 844 crores were saved by way of recovery. Lastly, 121 arrests were made in this regard.  

What is the motive of such frauds?  

Other than GST evasion, CBIC has observed that the frauds facilitate money laundering and showing fake purchases for getting income tax benefits. About the latter, showing reduced profit margins and higher expenses helps in reducing net profits while accounting. This helps entities acquire income tax benefits. On the other hand, those seeking to present an inflated turnover could benefit from a higher credit limit or overdraft from banks, obtain bank loans and improve their valuations for a stake sale or an IPO, among other things. The fake invoice paradigm could also be utilised to divert for company funds in a manner that helps the entity save up on taxes from the conventional route.  

Would these measures help?  

Shashi Mathews, Partner at INDUSLAW with a practice focussed on tax-related issues, states that the intent and objective of the measure might be “progressive in nature” and would help achieve its stated endeavour. However, he adds, “A lot does depend on each state government’s readiness including but not limited to ensuring adequate resources and training for GST officials to seamlessly carry out such functionalities to keep a check on GST frauds on a larger scale.” Further, Mr. Mathews states that, when the functionality is released on a large-scale, it must be user-friendly for it to be successful. 

Mahesh Jaising, Partner at Deloitte India observed that the focus on high-risk applicants, particularly those with a history of cancelled or suspended registrations underscores the commitment to institute a “credible and transparent GST system.” The measures, supported by the Directorate General of Analytics and Risk Management (DGARM) and GSTN, would enhance the security and integrity of the registration process, Mr Jaising states. Additionally, he observed, “Industry hopes for a single biometric authentication across India, allowing one-time verification in any State for companies with a presence in multiple States.” In this context, he believes that this move would help streamline the process further and reduce redundancy.

While stating that the measures would avert fake invoicing to a large extent, Mr Mathews noted, “One cannot rule out discrepancies in the Aadhaar information itself. But that does not take away the fact that a majority of registrations in the future would have credibility due to this exercise.”  

Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi on June 22, 2024.
| Photo Credit: PTI

Union Finance Minister Nirmala Sitharaman said the 53rd GST council has taken a lot of decisions relating to trade facilitation and easing the compliance procedures for small businesses, MSMEs and other taxpayers.

Services by way of hostel accommodation provided to students outside educational institutions will be exempted from GST for services with a value of upto ₹20,000 per person per month, Ms. Sitharaman said.

Also Read | Move ahead: On GST and reform

This will be subject to the condition that such services are provided for a minimum continuous period of 90 days. This will particularly help students coming from rural areas, and will be a big relief for all students across India.

The GST Council has clarified that all solar cookers will attract 12% GST, whether linked to single or dual energy sources. the finance minister said.

The Council has also decided to exempt services provided by the Indian Railways to the common man such as waiting room, cloak room and so on, from GST. All intra-railway services will also be exempted from GST, she added.

The Council has decided to mandate biometric-based Aadhaar authentication for all GST registrations across the country in a phased manner. This is based on the successful rollout of pilot projects in Gujarat and Puducherry and will make the registration process quick while curbing the fraudulent use of input tax credits through fake invoices.

Bharatiya Janata Party (BJP) leader Nirmala Sitharaman arrives to assume charge as the Union Finance Minister, at the Ministry of Finance in New Delhi on June 12, 2024.
| Photo Credit: ANI

The Centre has decided to convene a meeting of the Goods and Services Tax (GST) Council on June 22, eight-and-a-half months after its last meeting, the Finance Ministry said on June 13, 2024.

“The 53rd meeting of the GST Council will be held on 22nd June, 2024 at New Delhi,” a ministry statement informed.

The Council that is generally expected to meet every quarter, has met just six times since 2022.

The agenda for the upcoming meeting is not known yet but State Finance Ministers can be expected to flag suggestions for the indirect tax regime that can be incorporated in the Union Budget likely to be presented next month.

Industry will also be keen for signals from the Council on the revival of a plan to restructure the complex multiple-rate tax structure, now that GST revenues have risen significantly, along with a promised review of the 28% levy on bets made in online gaming, casinos, and horse racing.

Consumers and industry would also be eyeing some visibility on the future of the GST Compensation Cess that was originally meant to be levied for the first five years of the GST regime that began in July 2017. The levy of the Cess, used to recompense States to come on board, had been extended after the pandemic.

At its last meeting held on October 7, 2023, the Council, headed by the Finance Minister, had initiated discussions on a “perspective plan” to impose a cess or surcharge on top of GST levies after March 2026, when the GST Compensation Cess is due to expire. The Council had then decided to meet in the future to discuss a replacement levy for the Cess and how those funds could be used.

Implementation of Bommai report

To rationalise and rejig multiple GST rates and simplify the tax structure, the Council had set up a group of ministers (GoM) under former Karnataka Chief Minister Basavaraj Bommai in late 2021. Some initial recommendations of the ministerial panel to withdraw exemptions and concessional rates on several items had been accepted by the GST Council in June 2022.

However, the panel did not move forward on its broader rate rationalisation mandate, with officials citing high inflation and revenue considerations as key factors to put the exercise on the backburner. The GoM also remained in suspended animation after Mr. Bommai’s party lost the Karnataka assembly polls last May. The GoM was reconstituted in late 2023 with Uttar Pradesh Finance Minister Suresh Kumar Khanna as its convenor.

Apart from broader reforms to the indirect tax regime, tax experts also hope for resolution of some long-pending operational issues and challenges at the upcoming meeting.

“Multiple clarifications are being looked after to including taxability for the online gaming sector before October, taxability of ESOPs, corporate guarantee taxability, and various rate-related clarifications are also anticipated due to recent litigations,” said Abhishek Jain, indirect tax head and partner at KPMG. 

Somnath Zende, 39, a police sub-inspector (PSI) in Pimpri-Chinchwad, Pune’s largest satellite city, says he trains at the gym for two hours, before work begins at 9 a.m. To build his body, he spends ₹600 daily on protein shakes and other supplements, besides his expenditure on the gym membership.

About three months ago, as chatter about the ICC Men’s Cricket World Cup grew through media channels and across dining tables, his brother, Ganesh, 26, downloaded Dream11, a fantasy sports app, on Zende’s budget smartphone. Zende himself ‘invested’ ₹1,500 on creating Dream11 teams over the next few months, a great deal less than what he spends on bodybuilding each week.

But on October 10, when he won ₹1.5 crore for assembling a ‘fantasy’ winning cricket team for the England-Bangladesh match in Dharamshala, Zende was suspended for “promoting” real-money gaming, as a senior officer in the Pimpri-Chinchwad police says. The officer adds that playing these games is “not socially correct”.

The suspension laid bare the continuing tension between governments and law enforcement officials concerned about Indian citizens’ mental health on one hand, and fantasy sports gaming companies concerned about revenue, on the other. A Deloitte report from 2022 values the nascent industry at ₹34,000 crore.

Euphoric from the win, Zende, in uniform, had given media interviews — including to the BBC — that went viral, speaking in Marathi about how he had assembled the team that led to the win. The reason for his suspension on paper was that he had violated Maharashtra State Police’s code of conduct by a) playing the online game without permission from his unit commander, b) giving media interviews about his personal victory in uniform, and c) potentially being on the app while on duty.

An inquiry was opened into whether he was playing the game on duty as a PSI of the riot control police. “We would have been very happy if he had won in the real team 11,” says one of the officers on the investigation team.

App happy

Fantasy gaming apps allow users to deposit money in-app to build a virtual team or teams of players, and pit them against others. Users may win different amounts, depending on players’ actual on-ground performance. Those who top the leaderboard win the maximum cash, with a few others also reaping in some benefit. Many simply lose their money; some get back just what they had put in.

Much like mutual funds and stock market investment firms do with all advertising, companies in the real-money gaming app space declare the cash people put in as “financially risky”. However, these companies have successfully resisted the “betting and gambling” label in India’s courts. In fact, Dream11, which calls itself a strategy-based game, and others like it, have been upheld in various judgments as centred around skill that cannot be prohibited by State governments. This makes earnings from these apps taxable, and Zende will get roughly two-thirds of the ₹1.5 crore after fees and tax deductions.

In the past though, the concern of at least four State governments — reflected in various court proceedings in the High Courts — is that real-money gaming is in essence, gambling.

Dream11, one of the official partners for the ongoing ICC World Cup, raked in over ₹4,000 crore in annual revenue in 2021-22. Founded in 2008 as a free-to-use fantasy league for cricket fans, it began in-app purchases in 2012, and has grown to be the biggest fantasy sports league in India, with over 20 crore registered users playing across live cricket, football, and kabaddi, according to its website. “In the fiscal year 2022, Dream11 had the highest ad spend among fantasy sports and real-money gaming companies in India, with around 21.6 billion Indian rupees,” says an article on Statista, a data intelligence service.

Legal eagle

Recalling the day he won, Zende says, “A friend called me up and told me my name was flashing on TV. I was so happy. I told my wife immediately, and she said, ‘That’s not possible; things like this don’t happen’.” But it had. After two weeks, he talks about the win with a certain nonchalance, to some extent because of all that has happened since: the indefinite suspension from service, the viral reach of his win, and the media circus around both.

As videos featuring interviews of Zende went viral on WhatsApp, and Pimpri-Chinchwad, an emerging industrial hub, came into the limelight, a local politician took note. Amol Thorat, who was until recently the city’s BJP general secretary, shot off a letter to the police commissioner and to other top officials in the State government. Forwarded interview clips made it look to him like Zende was promoting online gambling, Thorat’s aide says. “He took up this issue and gave a letter to the commissioner saying it’s against the law. And the pressure started building up.”

On his part, Zende, who has not broken his routine of going to the gym from 6 a.m. to 8 a.m., refuses to speak about the suspension while he is being investigated. He has busied himself visiting relatives in and around Pimpri. “My philosophy in life is just to be happy, no matter what,” says the family man, with two children, aged 7 and 3, as he breaks into a faint smile. When the term “online gambling” comes up, he quickly clarifies, “Not online gambling, skill gaming.”

Vinayak (first name withheld on request), a police constable, who works under Zende, says, “He doesn’t take tension (sic) at work. Outside the station, he freely speaks his mind.”

Born to farmers in Jejuri — a part of the Pune district and home to the Shaivite Khandoba Temple, a pilgrimage destination — Zende moved to Pimpri in 2011 and started work as a constable in 2012. After three years of preparation and obtaining a B.A. degree, he cleared the Maharashtra Public Service Commission’s entrance examination to join as a PSI in 2016. He had started working out around this time.

Concerns of States

States have been worried about the rise in people landing in financial trouble, and worse, taking their lives from the trauma of losing lakhs of rupees when they play real-money games online. Gaming disorder is a mental health condition, after all. In Tamil Nadu alone, a four-member committee found that 17 people in the State had killed themselves after they had lost money on these apps. States such as Karnataka and Tamil Nadu tried to prohibit these games, but the bans were overturned in their respective High Courts.

Some States decided that enough was enough. Zende’s was one of them. A Group of Ministers (GoM) chaired by Maharashtra was formed at the GST Council, the powerful body that decides the rates and terms of sales taxes. The plan was simple: instead of taxing firms like Dream11 on the 5-20% commission they imposed, charge the entire amount that users deposited.

“Activities detrimental to social well-being should not be encouraged or promoted,” Sudhir Mungantiwar, a Maharashtra Minister, who headed the GoM, said in its final meeting. Minutes of that meeting, released in October, say that he took a “resolute stance” on the issue. The tax, which kicked in on October 1 this year, is 28% of the ‘face value’ of bets. This means that if a user puts ₹100 into their wallet on the app, ₹28 will be taxed, against the earlier ₹4 or less.

Sanjay Malhotra, the Union government’s Revenue Secretary, went even further: people were being taxed less when they were risking their money than when they were buying essential food items, he complained. Whether something was a game of skill or chance wasn’t the determining factor anymore. Everything was taxed: from casinos and horse races to real-money games and lottery tickets.

The industry has been quiet since the tax was announced, after briefly expressing anguish at its imposition. “We are deeply distressed,” one firm lamented in a press statement. Real-money gaming began internationally in the late 1990s, with India picking it up in the early 2010s. It boomed as Internet prices fell and smartphones became cheaper and apps more accessible.

A top office-bearer of the Federation of Indian Fantasy Sports, of which Dream11 is a founding member, declined to discuss either the current legal situation or Zende’s dismissal. Another top official from the All India Gaming Federation, with 56 member companies on its membership rolls, did not respond to calls. A Dream11 spokesperson declined to comment too.

Zende hasn’t decided what he will do with the money yet, not even if he will pay off his ₹30-lakh home loan for a house he has bought in Pimpri-Chinchwad. As he waits for the inquiry report, due in about six months, he’s clear about one thing: he won’t quit his job, even though he has won far more than his salary will amount to over his police career. “I won’t leave this job,” he says. “I’ve worked very hard for it.”

If you are in distress, please reach out to these 24×7 helplines: KIRAN 1800-599-0019 or Aasra 9820466726.

Finance Minister Nirmala Sitharaman. File
| Photo Credit: PTI

Amid the sustained slump in India’s exports, the Goods and Services Tax (GST) Council has cleared a few measures to boost foreign trade, including enabling tax credits for services exporters receiving payments in rupees, critical for trade with countries like Iran and Russia that face global sanctions.

The government has been pushing for rupee-based trading arrangements with several countries to reduce the dependency on the U.S. dollar, and banks from over 20 nations have opened special rupee (INR) Vostro accounts with Indian banks to remit payments for their imports from India. However, many exporters of such services were being denied input tax credits under the GST regime as the norms required foreign currency receipts to recognise the ‘export’ status.

“The Council has recommended to issue a circular to clarify the admissibility of export remittances received in Special INR Vostro account, as permitted by the Reserve Bank of India, for the purpose of consideration of supply of services to qualify as export of services under the Integrated GST [IGST] Act, 2017,” the Finance Ministry said in a statement after Saturday’s meeting of the GST Council.

There were disputes arising from refund applications, where the GST officers would seek to deny the benefit on the ground that receipt of consideration in INR did not meet the condition prescribed for the purpose of qualifying as ‘exports of services’, explained Sanjay Chhabria, director, indirect tax at Nexdigm.

“This clarification will bring respite to the exporters whose refunds of GST were stuck for a long time on account of the disputes in respect of this particular aspect, and they were also being subjected to GST demands,” said Saurabh Agarwal, tax partner at EY.

Shashi Mathews, partner at Induslaw, said the proposed clarification shall particularly help firms which are seeking to receive export proceeds from Iran or Russia, which have U.S. sanctions imposed on regular remittance routes.

Relief for SEZ suppliers

Separately, the Council also decided to undo the effects of a July 31 notification that had made it difficult for firms supplying goods or services to special economic zones (SEZs) to claim tax refunds.

Mr. Chhabria said this move seeks to rectify an anomaly arising out of an inadvertent omission of such category of supplies from the option of refund with payment of tax, after amendments were made to the IGST Act.

“With the explicit inclusion of such supplies for rebate, the ambiguity on this comes to a rest and helps prevent apprehended potential working capital concerns for domestic industry engaged in SEZ supplies,” remarked Abhishek Jain, indirect tax head and partner at KPMG.

The Council has also recommended issuance of a circular to clarify the place of supply treatment for services entailing transportation of goods, including by mail or courier, in cases where the location of supplier or the location of recipient of services is outside India. The communique is also expected to clarify issues relating to supply of advertising and co-location services.

Industry has been awaiting clarifications on the export of goods by mail or courier for some time now, but the fine print will have to be studied to assess the impact, said Mahesh Jaising, partner and leader, indirect tax, at Deloitte India. “It is unclear if clarifications on advertising and co-location are in relation to export or domestic place of supply,” he added.

Finance Minister Nirmala Sitharaman speaks during a media briefing regarding the outcome of the 52nd Goods and Services Tax Council Meeting in New Delhi on October 7, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council on Saturday lowered the tax rates on certain millet-based products, tweaked the age-related norms for members of the much-awaited GST Appellate Tribunals, and ceded the taxation rights on extra neutral alcohol to the States, while lifting the haze on several long-hanging issues.

The Council also signalled that there would be no back-pedaling on the 28% levy to be imposed on bets made in online gaming, casinos and horse racing from October 1, despite 13 States not having passed the enabling laws yet. Tax demands worth an estimated ₹1.5 lakh crore served on e-gaming firms for the prior period were also discussed, but it was asserted that the amended GST law is not retrospective in nature.

The notices issued to gaming firms for recovering taxes for the period up to September 30, were based on the law as it existed for betting activities, the Council was told when Ministers from Delhi and Chhattisgarh raised the issue. The Supreme Court is expected to take a view on the tax demands for the prior period on an appeal filed by the Revenue Department against a Karnataka High Court decision that dismissed a tax demand of over ₹21,000 crore served on Gameskraft.

18 States have amended laws

Union Finance Minister Nirmala Sitharaman said that Delhi’s Finance Minister had raised concerns about the impact on the gaming industry, while Goa’s Minister flagged the impact on casinos.

“The Delhi Minister’s concerns were more on the lines of, ‘taxing them [online gaming] will kill a sunrise industry, our youth needs this industry’, and also then taking up the issue of the notices that have gone to these companies. Of course, she also highlighted that this decision has been discussed over two to three years, and if the decision taken by the Council is going to hurt the young and youthful industry that has so much prospects, and so on,” she said.

Revenue Secretary Sanjay Malhotra said that at the latest count, 18 States had passed the necessary changes to their GST laws through ordinances or amendments to make the 28% gaming levy effective from October 1. Even the 13 States that have not passed it have said that they will pass it with effect from that date, he added.

GST cess

Asked if the recent trend of higher GST revenues could lead to swifter rationalisation of the GST rate structure, Ms. Sitharaman said this was not discussed in the Council, adding that no call has been taken on the rationalisation exercise yet. She parried a query on the reconstitution of a ministerial group tasked with the issue, which was earlier headed by former Karnataka Chief Minister B.S. Bommai.

The Council decided to meet in the future to work out a “perspective plan” on imposing a cess or surcharge on top of GST levies and how those surcharges could be used after March 2026, when the GST compensation cess used to recompense States for joining the indirect tax regime is expected to be phased out.

Rate rejigs

Meanwhile, the tax rates on some goods and services were clarified or tweaked, along with measures to facilitate trade and explicitly lay out procedures and tax treatment where confusion prevailed.

For instance, an emerging dispute on the treatment of guarantees issued by directors of companies for corporate loans has been settled by stating that they will not attract GST. Guarantees issued by companies to their subsidiaries will attract 18% GST on 1% of the guarantee offered, or the actual consideration, whichever is higher.

Taxpayers have also been granted an additional window till January 31, 2024 to file appeals against pending cases that were filed by the Revenue Department till March 2023, by paying a slightly higher proportion of the disputed tax levy as a “pre-deposit”.

New Delhi:

The GST Council on Saturday clarified that guarantees provided by corporates to their subsidiaries will attract an 18 per cent GST, while no tax will be levied if a personal guarantee is given by a director to the company.

The council, chaired by Union Finance Minister Nirmala Sitharaman and comprising state ministers, also cut the GST rate on molasses to 5 per cent from 28 per cent.

It also ceded the right to tax Extra Neutral Alcohol (raw product for making alcohol for human consumption) to the states.

Accordingly, ENA used for human consumption will be exempt from Goods and Services Tax (GST), while ENA for industrial use will be taxed at 18 per cent.

Briefing reporters after the 52nd GST council meeting, Sitharaman said the reduction in GST on molasses will benefit sugarcane farmers and enable their dues to be cleared faster because more money will be left in the hands of the mills.

“The council and we all feel that it will also lead to a reduction in the cost of manufacturing cattle feed, which will be a major development,” she said.

Revenue Secretary Sanjay Malhotra said the council has decided that when the corporate guarantee is given by a director to a company, then the value of service will be deemed to be zero and hence, no GST will be applicable.

“When a corporate guarantee is given by a company to its subsidiary company, then it will be deemed that the value is 1 per cent of the corporate guarantee. So, it will attract GST at 18 per cent on 1 per cent of the total amount guaranteed by the parent company,” Malhotra said.

The GST Council also decided to levy a lower 5 per cent tax on millet-based flour when sold in pre-packaged and labelled form.

Flour, containing at least 70 per cent millets, will attract zero per cent GST if sold loose and 5 per cent if sold pre-packaged and labelled.

The council also decided to cap the maximum age of GST Appellate Tribunal (GSTAT) President and members.

The GSTAT President will have a maximum age cap of 70 years, while the limit for members will be 67 years.

This is a change from the earlier age limit of 67 and 65 years, respectively, for the GSTAT President and members.

The establishment of these tribunals was a much-awaited move for industry players, who had been approaching the High Courts and Supreme Court during the past six years. File
| Photo Credit: AFP

The Finance Ministry notified the constitution of 31 Appellate Tribunals across 28 States and eight Union Territories for the Goods and Services Tax (GST) late on Thursday night, setting the stage to resolve a growing number of taxpayer disputes with the Revenue Department.

The establishment of these tribunals — envisaged at the time of the implementation of the GST regime from July 1, 2017 — got a final clearance from the GST Council this July, and was a much-awaited move for industry players, who had been approaching the High Courts and Supreme Court during the past six years.

Editorial | An incomplete reform: On six years of the Goods and Services Tax  

As of June 30, the number of pending appeals from taxpayers over central GST levies had spiked sharply to over 14,000. That marks a 20% growth from the number of such pending cases as on March 31 this year.

Tribunals in States

While States had proposed 50 tribunal benches to the GST Council, the Union government had signalled that they will come up in a phased manner, beginning with State capitals and cities with High Court benches. The first set of tribunals will become operational sometime between this November and January 2024.

To start with, Uttar Pradesh will have the highest number of benches of the GST tribunals, with three benches proposed to be set up across Lucknow, Varanasi, Ghaziabad, Agra, and Prayagraj. Karnataka and Rajasthan will have two benches each, while Maharashtra and Goa together will have three benches to take up appeals.

Editorial | Opportune moment: On the uptick in GST revenues

Tamil Nadu, along with Puducherry, will have two benches, as will Gujarat along with the Union Territories of Dadra and Nagar Haveli, and Daman and Diu. Disputes arising in West Bengal, Sikkim, and the Andaman and Nicobar Islands will be taken up by two benches of the tribunal to come up in Kolkata.

For the seven northeastern States, one tribunal bench has been proposed in Guwahati, with circuit benches in Aizawl, Agartala and Kohima that will be operationalised depending upon the number of appeals filed by suppliers in respective States.

Expediting adjudication

“Constitution of GST Appellate Tribunals (GSTATs) will expedite the process of adjudication and provide tax certainty specially in recurring litigative issues,” said Abhishek A. Rastogi, founder of Rastogi Chambers, who has argued various writ petitions before the High Courts in the absence of such a tribunal so far.

“Ensuring speedier and economic resolution of cases by dedicated and specialized GSTATs will help in bolstering business sentiments and ease of doing business in the country,” said Confederation of Indian Industry director general Chandrajit Banerjee.

The number of appeals against the orders of first Appellate Authorities has been rising sharply. In the last two years alone, such appeals more than doubled from 5,499 in 2020-21 to 11,899 cases in 2022-23, he pointed out.

“Where the taxpayers feel that there has been a burden of high rate of pre-deposit, the decisions by the tribunal will give some relief,” Mr. Rastogi told The Hindu.

Image for representation purpose only.
| Photo Credit: Reuters

The government on September 6 notified amendments to GST law in relation to the valuation methodology to be adopted by online gaming companies and casinos for calculating tax.

The Ministry of Finance notified amendments to Central GST law for calculating value of supply in case of online gaming and casinos as per the decision of the GST Council last month.

Also read: ‘Government intervention will give regulation of online gaming a lot more teeth’

EY Tax Partner Saurabh Agarwal said this shall effectively settle the ambiguity and uncertainty around this issue. “However, the aspect of whether mere deposit of money in a wallet qualifies as a supply is unclear, and may possibly be challenged by industry,” Mr. Agarwal added.

AMRG & Associates Senior Partner Rajat Mohan said under the valuation rules, the full tax rate would be applicable on the total amount paid to online gaming company/casinos, without any relief to the taxpayer in case of refund/return of money.

Notification clarified that winnings by any player would remain tax-neutral, as the entire tax is collected at first stage only.

“Until now, the government has not indicated any transitional provisions for the current cash buy-ins in the player pools. We can expect the government to clarify this position through a circular in the coming few months,” Mr. Mohan added.