The council's emphasis on simplifying tax structures, streamlining compliance mechanisms, and promoting growth has been appreciated
The recommendations from the 52nd GST Council meeting have been met with diverse reactions from the Indian industry. Overall, the council's emphasis on simplifying tax structures, streamlining compliance mechanisms, and promoting growth has been appreciated.
Certain sectors did express concerns regarding specific proposals that may add complexity or prove to be a burden on smaller firms, potentially hindering innovation and expansion. As the Indian government remains responsive to feedback from industry stakeholders and continues refining its tax policy, it is crucial that a delicate balance is struck between simplifying taxation for businesses while still ensuring adequate revenue generation to support national development goals.
Ankur Gupta, Practice Leader, Indirect Tax at SW India said, “While the council hasn't clarified on online gaming, it is good to have a clarity on valuation of corporate guarantee. The same should end the pending disputes with the authorities and bring relief to taxpayers. Taxing the ENA for industrial use will increase the cost of production and by introducing a new levy it was important to explain the rationale behind it which is why Honourable FM gave the background on ENA and its taxability. Also With GST council ceding the right to levy GST on ENA, we might also see some states imposing VAT on ENAs.”
Sanjay Chhabria, Director, Indirect Tax, Nexdigm opined, “The 52nd GST Council meeting in New Delhi today has been fruitful and several key decisions were announced by the Hon’ble Finance Minister. The GST Council has put to rest an emerging dispute over taxability of personal and corporate guarantees. It has clarified that personal guarantees offered by directors to the bank against the credit limit / loans being sanctioned to the company will not be subject to tax where no consideration is involved in any form, directly or indirectly.”
He further added, “This decision is aligned with the Apex Court decision in Edelweiss Financial Services Limited (though it pertained to the Service Tax regime). Conversely, the Council has decided to impose tax at 18 per cent on the corporate guarantee provided for related persons including by holding company to its subsidiary, with an insertion of a new sub-rule to provide for valuation at 1 per cent of the amount of guarantee offered or the actual consideration, whichever is higher. While this decision should largely settle the question of taxability, it would be beneficial if the Council also addresses whether the same is applicable prospectively or retrospectively. Additionally, it is important to consider whether this update will prompt the reopening of previously closed audits and assessments or freezing of demands for ongoing litigations. A comprehensive clarification from the GST Council / CBIC that encompasses these aspects would be highly valuable.”
Gunjan Prabhakaran, Partner & Leader, Indirect Tax, BDO India shared views on taxability of personal guarantee. “By clarifying about the taxability of the personal guarantee provided by the directors and corporate guarantees, the GST Council has addressed an issue which is being faced by a large number of industrial houses. The GST Council also recommended to determine the value of supply as one percent of the amount of guarantee, when guarantee is given without consideration by a corporate and nil value, when a guarantee is given by the director without consideration, bringing an end to divergent practices being adopted for valuation. The industry would keenly await the fine print of the circular and the amendment in the law with the hope that these amendments would resolve the issue for the past period as well.”
Shashi Mathews, Partner, INDUSLAW said, “GST Council has finally granted an immense relief to the alco-bev industry by recommending keeping ENA outside the ambit of GST. As on date, different positions have been taken by the businesses, where some companies were paying GST and others were discharging VAT on ENA, which is one of the raw materials for manufacture of alcohol for human consumption. Owing to the fact that alcohol beverages are outside the ambit of GST, input GST paid on ENA was becoming a cost.”
Rajitha Boorugu, Partner, Indirect Tax, BDO India shared views on GST for ENA for alcoholic liquor. “The GST Council’s recommendation to keep ENA, used for manufacture of alcoholic liquor for human consumption, outside GST resolves an important issue for the alcoholic beverage industry, where multiple views were prevalent on this issue and a large number of disputes were ongoing with GST authorities and in some cases, with State VAT authorities as well. The industry would look forward to the amendments which are proposed to be made in the GST law to give effect to this announcement and will hope that the issue is resolved for the past periods as well.”
Gyanendra Tripathi, Partner, Indirect Tax, BDO India shared about filing timelines before appellate appeals. “The announcement of extension in time period for filing appeal before the first appellate authorities, in case of demand orders passed on or before 31 March 2023, is welcomed by the smaller taxpayers, many of whom were unable to file appeals within time due to various factors such as lack of awareness or the technical issues as well as due to disruptions due to pandemic.”
Source : Business World