For the GST Council to meet 50 times in the past 6 years from the introduction of Goods & Services Tax (GST) in India, is by itself a testimony of the commitment of the Government of India to continually monitor the progress of the implementation, address the issues and concerns faced by the trade community and simultaneously ensure that measures to tighten tax evasion and fraud are implemented. For a smooth execution of the law to meet its desired objectives in the long run, it is essential that the progress and processes are monitored on a regular basis, and necessary measures are put in place. The GST Council has showcased this responsibility ably, in all these past years.
When we specifically look into the discussions of the 50th GST Council meeting held on 11th July 2023 –chaired by the Finance Minister, it seems to largely aim at addressing various trade facilitation measures/compliance simplification, redressing industry-specific issues and also rationalizing tax rates on certain products/ services. Further, with an aim to strengthen the registration process and prevent tax evasion/fraud in the wake of the special drive by the Government, certain additional processes and stringent measures have also been proposed.
One of the most awaited tasks of the Trade and industry has been the requirement of a functional GST Appellate Tribunal, to address litigations/disputes originating due to an increase in audits and assessment proceedings. When cases decided by the Appellate Commissioner had to be contested/litigated by the Trade, due to the absence of the GST Tribunal, affected taxpayers were required to approach the High Courts to seek special intervention, thereby increasing the pressure on the already stressed High Courts. The Council has recommended setting up of the GST Appellate Tribunal from 1st August 2023 in a phased manner, which is a welcome step. Some other important measures relate to addressing specific legal issues/ positions, which have been prone to disputes/litigations- such as clarification on the requirement of the Input Service Distributor (ISD) Credit distribution mechanism.
The GST Council has recommended clarifying through a circular that the ISD mechanism is not mandatory for the distribution of input tax credit of common input services procured from third parties to distinct persons (different GST registrations of the same legal entity) as per the present provisions of GST law. This clarification will offer relief to taxpayers who have faced objections from the tax department for distributing common input tax credits through cross-charge invoices instead of the ISD mechanism (by filing ISD returns separately). However, the GST Council has also proposed making the ISD mechanism mandatory in the future for distributing input tax credits for such common input services obtained from third parties, by amending the GST law.
The GST Council has also recommended clarifying issues regarding the taxability of internally generated services provided by one distinct person to another distinct person (services provided by one GST registration/office to another within the same legal entity). It also explained the scope and ambit of taxable supplies within the ‘distinct’ units of the same legal entity, non-levy of GST on holding of securities of a subsidiary company by a holding company, credit reversal requirements on warranty parts replacement, etc. Clarifications on the above aspects would certainly remove ambiguities and minimize legal disputes.
On the policy front, one of the key decisions taken is about bringing online gaming, Casino, and Horse Racing, at par and taxing the same at 28 per cent GST on full-face value. GST on online gaming has been a debatable topic of discussion recently, wherein in one of the landmark judgements the Hon’ble High Court of Karnataka granted relief to the online gaming industry – holding that online/ electronic/ digital games of skill played with /or without stake, are not akin to ‘betting’ and ‘gambling’ & hence not liable to GST. The High Court affirmed that GST@18% would be applicable only on platform fees charged by the gaming industry, as service charges earned by them. While delivering the said judgment, the High Court deliberated at length, the concept & distinction between “game of skill” vis-à-vis “game of chance or luck” which has evolved over a period of time. Now, with this proposed amendment, the entire online gaming industry gets taxed at 28 per cent on full face value, without any differentiation between the game of skill and the game of chance. One will have to wait and see the reaction of gaming industry players to this proposed amendment.