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The 53rd meeting of Goods and Services Tax (GST) Council is likely to consider a number of measures at its meeting on Saturday that are expected to set the tone for broader tax reforms in the upcoming full first budget of Modi 3.0.
The council is expected to discuss the use of GST compensation cess amount collected from sin goods such as pan masala, cigarettes, etc. which may amount to Rs 70,000 crore. Other discussions may include the conditional waiver of interest or penalty on tax notices issued between 2017 and 2020, barring cases of wilful default and review of the decision to levy 28 per cent GST on the full value of bets for online gaming companies
The GST Council may also deliberate on streamlining timelines for issuing notices, establishing monetary thresholds for pursuing disputes in the GST Appellate Tribunal, and setting a deadline for anti-profiteering cases. These reforms aim to minimize tax litigation and enhance the ease of doing business.
These measures are expected to provide respite to various sectors such as online gaming, insurance firms, banks, non-banking financial companies (NBFCs), airlines, and shipping companies, which have been grappling with substantial tax liabilities.
Sin goods windfall
The Centre could receive an unexpected windfall of Rs 70,000 crore through a strong goods and services tax (GST) compensation cess, even after repaying loans taken on behalf of states during the Covid-19 period.This additional cess is imposed on items deemed as “sin goods,” including pan masala, cigarettes, carbonated beverages, and automobiles, which already attract the maximum 28% GST rate.
“Going by the collection trend we would be able to make a prepayment of all the loans much ahead of the March 2026 deadline (and) would also be left with about Rs 65,000-70,000 crore,” a senior official told ET.
The Centre is yet to take a final call on the use of this extra cess amount, but officials expect the issue to resonate in the GST Council meeting on Saturday when discussion begins on rate rationalisation.
Online gaming
The GST council is expected to review the decision to levy 28 per cent GST on the full value of bets for online gaming companies, which came into effect on October 1, 2023.
During its meetings in July and August, the GST Council approved amendments to include online gaming, casinos, and horse racing as taxable actionable claims. It clarified that these activities would be subject to a 28% tax on the full bet value. Initially, it was announced that a review of the implementation would take place after six months.
Recently, the GST Council is expected to reassess its decision regarding the imposition of a 28% GST on the entire bet value for online gaming firms, which became effective from October 1, 2023. In response to this decision, more than 70 show cause notices have been issued to online gaming companies, alleging GST evasion amounting to over Rs 1.12 lakh crore for the financial years 2022-23 and 2023-24.
Many of them have gone to court against the notices and the cases are pending.
GST Council is likely to discuss the legality of the show cause notices served to online gaming companies and the way forward.
Corporate guarantees
The council is also expexted to review its last meeting decision to levy 18 per cent GST on guarantees provided by corporates to their subsidiaries.
The Punjab and Haryana High Court has issued a stay on the CBIC circular regarding corporate guarantees. A review of the legal implications of this circular is expected to be discussed during the meeting scheduled for today.
GST on Fertilisers
The council may also discuss the recommendations made by the Standing Committee on Chemicals and Fertilisers in February to reduce GST on nutrients and raw materials in the interest of fertiliser manufacturing companies and farmers, reported PTI.
Currently, GST at a 5 per cent rate is charged on fertilisers, while raw materials like Sulphuric Acid and Ammonia face a higher GST at 18 per cent.
The issue of further reduce tax on fertilisers was placed before the GST council in its 45th and 47th meetings held in September 2021 and June 2022, though the council did not recommend any change in rates.
Saturday’s Council meeting will be held after a gap of eight months. The 52nd GST Council meeting took place on October 7, 2023.
Clarification for telcos
The GST Council is likely to clarify that telecom companies will have to pay GST, along with the instalments paid towards spectrum charges.
The clarification should end confusion among field formations regarding the method for collection of GST in the spectrum auction process.
Currently, the GST regime has five broad tax slabs of zero, 5, 12, 18, and 28 per cent. A cess is levied over and above the highest 28 per cent rate on luxury and demerit goods.
Other likely discussions
Also, the GST council may set a timeframe for the GoM on rate rationalisation to submit a report. The GoM has been reconstituted twice in the last one year and now is headed by Bihar Deputy Chief Minister Samrat Chaudhary.
The council is also likely to vet the amendments in the GST law with respect to a decision taken in the previous meeting in October last year.
The council had decided to give up the right to tax Extra Neutral Alcohol or ENA (raw product for making alcohol for human consumption) to states.
Accordingly, ENA used for human consumption will be exempt from Goods and Services Tax (GST), and states can continue to levy VAT. ENA for industrial use will continue to be taxed at 18 per cent under the GST.
To bring about this change, an amendment is required in the GST law.
With inputs from PTI
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