The GST Council on Monday (September 9, 2024) is expected to deliberate on a host of issues, including taxation of insurance premium, GoM’s suggestions on rate rationalisation, and a status report on online gaming, sources said.

Sources claimed the fitment committee, comprising Centre and State tax officials, will present a report on GST levied on life, health and reinsurance premiums and the revenue implications.

The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state ministers, will decide on whether to reduce the tax burden on health insurance from the current 18% or exempt certain categories of individuals, like senior citizens.

The deliberations will also happen concerning the goods and services tax (GST) cut on life insurance premium.

In 2023-24, the Centre and States collected ₹8,262.94 crore through GST on health insurance premiums, while ₹1,484.36 crore was collected on account of GST on health reinsurance premium.

The issue of taxation on insurance premiums figured in Parliament discussions with opposition members demanding that health and life insurance premiums be exempt from GST. Even Transport Minister Nitin Gadkari wrote to Ms. Sitharaman on the issue.

Finance Minister Nirmala Sitharaman in her reply to the discussion on the Finance Bill had said 75% of the GST collected goes to states and opposition members should ask their State finance ministers to bring the proposal at the GST Council.

West Bengal Finance Minister Chandrima Bhattacharya had raised the issue in the meeting of the Group of Ministers (GoM) on rate rationalisation last month and the matter was referred to the fitment committee for further data analysis.

The GoM had opined against any tinkering with a four-tier GST slab of 5, 12, 18, and 28% for the time being. The panel, however, had asked the fitment committee to look into any scope for rationalisation of rates of goods and services.

Regarding online gaming, Centre and State tax officers will present a “status report” before the GST Council. The report would include GST revenue collection from the online gaming sector before and after October 1, 2023.

From October 1, 2023, entry-level bets placed on online gaming platforms and casinos were subject to 28% GST. Before that, many online gaming companies were not paying 28% GST, arguing that there were differential tax rates for games of skill and games of chance.

The GST Council in its meeting in August 2023 had clarified that online gaming platforms were required to pay 28% tax and subsequently Central GST law was amended to make the taxation provision clear.

Offshore gaming platforms were also mandated to register with GST authorities and pay taxes, failing which the government would block those sites.

The council had then decided that the taxation on the online gaming sector would be reviewed after six months of its implementation.

Sources said the Council would deliberate on the status of taxation on the sector and any change in tax rates is unlikely.

Besides, the Council is likely to be apprised about the ongoing drive against fake registration, the success of the drive, and action taken against such entities. The total amount of suspected GST evasion would also be presented before the Council.

The drive, from August 16, 2024, to October 15, 2024, is aimed at detecting suspicious/fake GSTINs and to conduct requisite verification and further remedial action to weed out these fake billers.

In the first drive between May 16, 2023, to July 15, 2023, against fake registration, 21,791 entities (11,392 pertaining to state tax jurisdiction and 10,399 pertaining to CBIC jurisdiction) having GST registration were discovered to be non-existent.

An amount of ₹24,010 crore (State – ₹8,805 crore + Centre – ₹15,205 crore) of suspected tax evasion was detected during the special drive.

Also, the Council would approve notifications, including that of the amnesty scheme, announced in the last council meeting. The various amendments to GST law decided by the council in its previous meeting on June 22 were passed by Parliament last month vide Finance Act, 2024.

The council’s June meeting took a host of taxpayer-friendly measures, including waiver of interest and penalty for demand notices issued in the first three years of GST — 2017-18, 2018-19, and 2019-20 — if the full tax demanded is paid by March 31, 2025.

To reduce litigation, a monetary limit for tax officers, to file appeals before the GST Appellate Tribunal, the High Court and the Supreme Court was fixed at ₹20 lakh, ₹1 crore and ₹2 crore, respectively, by the Council.

It also recommended a reduction of the quantum of pre-deposit required to be paid by taxpayers for filing of appeals under goods and services tax (GST).

In August, gross revenues from domestic transactions were up 9.2%, improving from an 8.9% rise in July,
| Photo Credit: Getty Images/iStockphoto

The growth in India’s Gross Goods and Services Tax (GST) collections slowed down marginally to 10% in August from 10.3% in July, with revenues of nearly ₹1.75 lakh crore, but the rise in net receipts slumped to 6.5% from 14.4% in the previous month.

Sequentially, gross revenues were 3.9% lower in August vis-a-vis July, when they had hit their third-highest monthly tally a tad over ₹1.82 lakh crore. However, net revenues, after adjusting for refunds to taxpayers, were ₹1,50,501 crore in August, marking a sharper 9.2% drop from July’s kitty.

The uptick in July’s gross GST revenues had marked a sharp recovery over June, when growth had hit a three-year low of 7.6%.

In August, gross revenues from domestic transactions were up 9.2%, improving from an 8.9% rise in July, while receipts from imports rose 12.1%, slightly slower than the 14.2% growth in the previous month. After accounting for refunds, net domestic receipts grew just 4.9%, while revenues from goods imports expanded 11.2%.

New Delhi:

The government must remove or limit the 18 per cent Goods and Services Tax (GST) on mental health services, and allocate resources strategically to help India become a mentally resilient society, experts said on the eve of the Union Budget presentation on Monday.

Mental health is a key area of concern that can have a significant impact on the productivity and economy of the country.

“Mental health issues are highly prevalent, yet are poorly managed and are affecting a significant number of our population. In the upcoming Budget, we urge the government to remove or reduce the 18 per cent GST on mental health services,” Jyoti Kapoor, Founder & Director of Manasthali Wellness, told IANS.

According to experts, with declining mental health, there has been an increase in the need for health insurance policies that cover both physical and mental health.

Unfortunately, people are not reporting these conditions as the cost of the available medications and therapies often proves challenging.

Divya Mohindroo, counselling psychologist, highlighted the need for comprehensive policies to handle India’s mental health crisis and the need to increase the workforce in the sector.

“Out of an estimated 150 million people needing mental health services, only fewer than 30 million seek help,” Mohindroo told IANS.

“Lack of mental health professionals is crippling in India, with merely 0.3 psychiatrists, 0.07 psychologists, and 0.07 social workers available per 100,000 people,” she added.

“There should be specific measures for mental health, and we are hopeful the Budget will prioritise this urgent issue. There is an immediate need to strengthen India’s mental health workforce, with just one psychiatrist per two lakh people,” Mohindroo said.

She also suggested “scholarships to train professionals to help reduce this gap”.

The experts also suggested incorporating mental health services into healthcare insurance coverage.

“While government centres receive some relief, private practitioners are left burdened. Extending tax benefits to private practitioners is crucial, given the high operational costs for the average therapist. In addition to acknowledging the financial difficulties experienced by private practitioners, this change would help lower the cost and increase public accessibility to mental health care,” Kapoor said.

“This will help our citizens access mental healthcare without burdening them financially,” added Mohindroo.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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.”  

Share of personal income tax and indirect tax shows increase

Over the last week, during the election campaign, the Congress’ manifesto and the party’s emphasis on social justice and welfare were suddenly thrust into the limelight. Prime Minister Narendra Modi sought to give the Congress’ demand for a caste census and its plans to study distribution of surplus government land to the poor, among others, a communal turn. The Congress defended its manifesto saying the rising wealth inequality in the country needs to be addressed and dismissed Mr. Modi’s claims that its plans intended to favour a particular religious group. In the midst of this political controversy, the chairman of the Indian Overseas Congress, Sam Pitroda, floated the idea of an inheritance tax, which is not in place in India and is also not mentioned in the Congress’ manifesto.

Almost concurrently, as this political debate was playing out, the Finance Ministry released provisional data that showed an uptick in net tax collections. This is mostly driven by an increase in personal income tax and securities transaction tax collections. On the other hand, collections from net corporate taxes have reduced marginally. The data also show that revenues from personal income tax and securities transaction tax grew at almost double the pace compared to revenues from corporate taxes last year.

We look at some numbers to provide context to the ongoing debate and the recent release of tax data.

Chart 1 | the chart shows corporate tax and personal income tax as a share of gross tax revenue, as of February every year.

Chart appears incomplete? Click to remove AMP mode

As can be seen from the chart, the share of corporate tax has been on a decreasing trend, while that of personal income tax has been increasing. As of February 2024, the gap between the two tax shares further increased, with income tax forming 28% of the gross tax — a new peak. The sharp fall in corporate tax after FY19 can be attributed to the deep corporate tax cuts introduced by the Bharatiya Janata Party-led government in September 2019.

The data also show that the share of direct taxes has been decreasing, while that of indirect taxes has been increasing. Direct taxes, which include taxes levied directly on the incomes of corporations and individuals, are said to be “progressive” because those who earn less are taxed less and vice-versa. On the other hand, indirect taxes, which include union excise duties and the Goods and Services Tax are considered “regressive” as all consumers, regardless of their income levels, pay the same amount.

Chart 2 | The chart shows the share of direct and indirect taxes in the combined tax revenue receipts of the Centre and the States across years.

As can be seen from the chart, the share of indirect taxes, which had been falling steadily since the 1980s, has increased in the past decade. On the other hand, the share of direct taxes, which had been increasing, has consistently recorded a downturn in recent years.

Chart 3 | The chart shows the annual income bracket-wise share in total income tax returns filed (blue) and the share in total amount of income tax paid (red). Figures in %

Importantly, Chart 3 shows that a bulk of those who file personal income tax earn an annual income of ₹1 lakh-₹5 lakh. Richer individuals who earn more than ₹50 lakh are few and far between.

Moreover, a comparison with BRICS economies, for which data are available, shows that the effective personal income tax rate in India is among the highest (Chart 4).

Chart 4 | The chart compares the effective personal income tax rate in India with other BRICS countries which had data. 

Note: In case a country had two tax regimes, the highest effective tax rate was considered for comparison

Put together, the data show that poorer citizens and those in the middle-class category are increasingly shouldering a higher share of the tax burden. This is due to the combination of the rising share of personal income tax and indirect taxes in total revenue.

Rachita Rabboni is interning with The Hindu Data Team

Source: Centre for Monitoring Indian Economy, Controller General of Accounts, PricewaterhouseCoopers (PWC)

Watch our Data video: Watch | Key questions remain unanswered in electoral bonds controversy

An Indian consumer goods trader shows letters GST representing “Goods and Services Tax” (GST)at his shop in Hyderabad on August 3, 2016. Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising 13.4% to the second-highest monthly tally of ₹1.72 lakh crore.
| Photo Credit: AFP

Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising 13.4% to the second-highest monthly tally of ₹1.72 lakh crore.

October’s revenue growth marks the sharpest year-on-year uptick since December 2022. In September, the growth in the indirect tax collections had slowed to a 27-month low of 10.2%. Domestic transactions and services imports yielded a 13% uptick in October’s kitty. The Finance Ministry did not disclose the revenue growth from goods imports.

GST Compensation Cess collections hit a record high of ₹12,456 crore in October, surging past the previous high of ₹12,025 crore collected in April this year from the levy that will persist till at least March 2026.

Back-of-the-envelope calculations by The Hindu indicate that GST levies on imports of goods rose 13.9% in October, which is faster than the growth from domestic transactions.

The highest-ever revenue from GST was recorded in April 2023 at ₹1.87 lakh crore.

The average gross monthly GST collection in the FY 2023-24 now stands at ₹1.66 lakh crore, 11% higher than the year-ago period.

With inputs from PTI.

New Delhi:

The Congress on Thursday accused the Narendra Modi government of imposing an 18 per cent GST on the water of the holy Ganga river and termed it the height of “loot and hypocrisy”. The Central Board of Indirect Taxes and Customs, however, dismissed the Congress claim and said no such tax has been imposed on Gangajal, used in puja and other ceremonies.

With Prime Minister Narendra Modi undertaking a day-long visit to Uttarakhand on Thursday, the Congress also asked when will he visit the violence-hit Manipur.

“Modi ji, the importance of Mother Ganga, the provider of salvation, is very high for a common Indian from birth till the end of their life. It is good that you are in Uttarakhand today, but your government has imposed 18 per cent GST on the holy Ganga water itself,” Congress president Mallikarjun Kharge said in a post in Hindi on X.

“Not even once did you think what would be the burden on those who order Ganga water to be kept in their homes. This is the height of loot and hypocrisy of your government,” he also said.

The Congress also put out an animated video on the situation in the ethnic violence-hit Manipur on its social media handle and said, “The country is asking – when will PM Modi go to Manipur.”

In a clarification, the CBIC said there was no GST (Goods and Services Tax) on Gangajal.

“Gangajal is used in pooja by households across the country and puja samagri is exempt under GST… All these items have been exempt since the introduction of GST,” the CBIC said in a post on X.

The CBIC said that GST on ‘puja samagri’ was discussed in detail in the 14th and 15th meetings of the GST Council held on May 18-19, 2017 and June 3, 2017, respectively and it was decided to keep them in the exempt list. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

Life Insurance Corporation on Wednesday said the GST Authority has imposed a fine of Rs 36,844 on LIC for lower payment of taxes.

The corporation has received a communication/demand order for collection of GST, along with interest and penalty for Jammu & Kashmir state, LIC said in a regulatory filing.

As per the notice dated October 9, 2023, by the State Taxes Officer, Srinagar, LIC paid 12 per cent GST instead of 18 per cent on certain invoices.

The tax authority has raised a demand order cum penalty notice for 2019-20– GST – Rs 10,462, penalty Rs 20,000 and interest Rs 6,382.

There is no material impact on financials, operations or other activities of the corporation, it said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary, Revenue Secretary Sanjay Malhotra and others during the 52nd Goods and Services Tax (GST) Council Meeting, in New Delhi, on October 7, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council has decided to raise the maximum age limit for the president and members of the GST Appellate Tribunals, Finance and Corporate Affairs Minister Nirmala Sitharaman announced after the 52nd Council meeting.

The president can have a tenure up to the age of 70, raised from 67 earlier, while the cap for members has been raised from 65 to 67. The minimum age of appointment, which was not specified earlier, is now recommended to be 50 years.

“We wanted it to be clear that advocates with up to ten years of experience must be minimum for consideration to become judicial members of the tribunals,” said Ms. Sitharaman.

The GST Council also decided that food preparations of millet flour in powder form, with at least 70% of the composition as millets in the blend, will have a 0% GST if sold loose or packed without any branding and labelling, and 5% only if sold pre-packaged and in a labelled form.

Taxing extra-neutral alcohol

Another critical decision taken that Ms. Sitharaman said would have major implications in Centre-State ties was that though the GST Council had, by law, the right to tax the extra-neutral alcohol (ENA), the Council has ceded that right to tax ENA to the States.

“It’s States’ decision now to tax it or not to,” she said. “This has been done in the interest of the States.”

The Allahabad High Court had earlier ruled that States had lost their competence to levy a tax on ENA.

The GST on molasses has been reduced from 28% to 5%, which the Minister said would benefit sugarcane farmers and will enable them to get paid faster from the sugar mills.

“We also believe that it will reduce the cost of cattle feed. The GST rate notification will be amended to create a new entry for extra-neutral alcohol for industrial use and that shall attract 18% tax,” she said.

On services, in order to promote tourism, the Council has given a conditional exemption to foreign-flag, foreign-going vessels, from the levy of Integrated GST, if they convert temporarily for a coastal run.

“In other words, for the next couple of months, in the winter, let’s say foreign run vessels do cruise tourism along India’s coast, we have decided to exempt them from 5% IGST normally levied. This will promote tourism particularly on the Western coast, from Mumbai to Kochi, and even the eastern coast,” said Ms. Sitharaman.

New Delhi:

The Federation of Indian Fantasy Sports (FIFS) on Wednesday urged the government not to impose a 28% GST on online gaming with retrospective effect, as it is discouraging investors from putting their money into this booming industry.

The GST Council in its meeting in August held that online gaming would attract 28% GST on the face value of bets at entry level. Pursuant to the decision, the GST authorities have sent notices to several online gaming companies for recovery of taxes.

Speaking at the ‘TIOL Tax Congresss 2023’, Federation of Indian Fantasy Sports (FIFS) Director General Joy Bhattarcharjee said the issue of GST rate is more or less settled and the only issue that the industry have is retrospective provision of the law because it is discouraging investors to put in their money into this booming industry,” he said.

“However, retrospectivity of GST provisions is a very difficult blow for us. Having ‘contingent liability’ will spook away the investors whom we need during this growth phase,” he said.

Also, speaking at the occasion, Directorate General of GST Intelligence (DGGI) Principal DG Anil Kumar Gupta said that the government’s intention is not to discourage a rising industry, but to settle an issue lingering for a long time and the government is quite open to looking into the progress after some time. 

“It was not an easy decision… moreover, it will be up for review after six months, wherein depending on the scenario, the government will take a call,” Mr Gupta said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)