The 47th GST Council meeting is set to be held in Chandigarh on June 28-29. Thismeeting is happening after a gap of six months and will be the first that will take place after the Supreme Court landmark’s verdict in May on GST Council which affirmed that its decisions are merely recommendatory and not binding. ETCFO discusses with taxation experts key expectations of the industry from the GST Council.
GST clarity on crypto
The GST on crypto has topped the headlines for a couple of days now. It is speculated that the Council will discuss levying 28% GST on crypto transactions.
Parag Mehta, Partner, N. A. Shah Associates LLP, says, "A lot of non-clarity on GST impact for transactions in non-fungible tokens /crypto is existing in the minds of crypto exchange as well as their clients. It is high time there is a complete clear guideline on GST implications as volumes in the last two years have increased substantially."
Abhishek Jain, Indirect Tax Partner, KPMG also emphasizes it is high time that the GST Council should give the clarity on levying GST on crypto.
“The industry is keenly looking forward to the upcoming GST Council meeting. One of the industry expectations is clarification on cryptocurrency taxation from a GST point of view, as currently there is ambiguity around the same.”
The move if happens is expected to be a big blow for the crypto exchanges and the markets since the highest 28% GST slab will dent investors to put their money in such virtual digital assets, and may therefore significantly impact volumes. Already, the finance ministry has announced levying a 30% flat tax rate on income from cryptocurrency (effective from April 1, 2022) as well as a 1% Tax Deduction at Source or simply withholding tax on payment in relation to the transfer of virtual digital assets (effective from July 1, 2022).
GST compensation clarity to states
With the period for compensation to the states by the Centre ending on July 1, 2022, the industry also expects the central government to provide clarity on whether such a period may be further extended as some states like West Bengal demand. Initially, the Centre had agreed to compensate states for five years till June 2022 and protect their revenue at 14 per cent per annum over the base year revenue of 2015-16.
“The coming GST Council meet will predominantly focus on the GST compensation issue, given that all decisions on rate rationalization flow from this and how the state revenues are going to move in the coming years post constitution-mandated compensation. While the earlier compensation package may not get renewed, there is hope that some compensation, especially for the states short on revenue growth, may be agreed upon. In any case, the revenue growth is robust and should help reduce the compensation pay-out needed to the states.”
KPMG’s Jain says while the States are requesting compensation cess extension beyond five years, the industry players are averse to this idea as this directly affects the product pricing and demand.
GST clarity on online gaming, casinos
It is also expected that the Council will levy GST on online gaming, casinos and race courses at 28% on the gross revenue from currently 18%. A Group of Ministers, headed by Meghalaya CM, Conrad Sangma, has reportedly recommended increasing the GST and levying at full consideration. The GoM report will be presented before the GST Council.
“There has been a lot of news about hiking GST rate on casinos, race courses, and online gaming. The trade is expecting a complete clarity in the issue, i.e., on rate as well as the method of valuation," says Parag Mehta, Partner at N.A. Shah Associates LLP . If the GST Council decides on the increase, it may give tax certainty to the industry, but, it is expected to be discouraging for the gaming industry.
Correct inverted duty structures
The GST Council is also expected to correct inverted duty structures (Inverted duty structures are those where there is a higher tax on the input than the tax on finished goods itself and this results in excess accumulation of GST credit). It is unlikely to rationalize rates any further given the current high inflation. Last year, the GST council had set up a panel under Karnataka CM Besavaraj Bommai to look into ways to augment revenue by rationalizing tax rates; the panel, comprising state ministers, reportedly failed to meet consensus and is now likely to seek an extension to submit its final report.
“…given the current high inflation, businesses are expecting for the tax slabs to not increase, except maybe for sectors where inverted duty correction is required,” says KPMG’s Jain.
Resolve dual jurisdiction
The industry also expects the GST Council to resolve issues of dual jurisdiction and multiple proceedings. The trade has to deal with the jurisdictional officer, audit Commissionerate, anti-evasion authorities, etc under respective State and Central governments, and over and above investigations by Directorate General of GST Intelligence (DGGI) authorities also in some cases.
“Issues for investigation may be different but still, it is difficult for the trade to manage its day -to-day business along with attending multiple agencies under the Same Act. The matter needs to be clarified by the Council at the earliest to ensure Ease of Doing Business.”
Abhinav Srivastava, Partner - Indirect Tax, BDO India says there are a few other pressing issues where clarity is required.
First, he says, the issue of Head Office being a deemed ‘supplier’ of services to branch offices is a matter worrying many taxpayers who have multi-locational set – ups.
Second, he says, there has been a demand to introduce a one-time amnesty scheme for the settlement of GST dues that might help to reduce the quantum of litigations. And third, he says that the exporters should be given an additional time window to file refund claims because of the disruption caused by COVID-19.
"The industry would be hoping for suitable clarifications on some of these issues “BDO's Srivastava signs off.
Source: Economic Times