Tax World reacts to GST Council's 50th Meeting Recommendations

The 50th GST Council Meeting was a landmark in the 6-year journey of the GST Law as the Council notified that the provisions in the GST Act relating to GST Appellate Tribunals (GSTAT) will be effective from 1 August 2023 and approved rules for the appointment and conditions of President and Members of the GSTAT. It is the aim of the Government to operationalise the GSTAT in the current financial year. This would give respite to the taxpayers adopting the cumbersome legal route of approaching High Court for every dispute involving even smaller stakes. This would undoubtedly reduce the litigations before the High Court and would now make the appellate redressal process quick.

Clearly, one of the most awaited agendas for the Council was with respect to the taxation of casinos, racecourses and online gaming. The Council recommended charging GST @28% on the full value of bet amount without distinguishing between game of skill and chance and also proposed to amend the Schedule III to the CGST Act to include online gaming and horse racing within the purview of taxable actionable claims. This recommendation would also unsettle the tax position for the past period, which was affirmed by the favourable decision of Gameskraft Technologies Pvt. Ltd which held online games, such as rummy, as games of skill, outside the purview of ‘betting and gambling’ and hence, not leviable to GST on the amount of bets. The online gaming industry would now need to carefully assess the way forward in the aftermath of the clarification.

Furthermore, since the implementation of GST in 2017, the issue of Cross charge vs. Input Service Distributer (ISD) has been a point of debate across the industry and even at the departmental level. To put rest to this ongoing tussle between the taxpayers and the department, the Council has recommended to issue a circular clarifying that the ISD mechanism is not mandatory for the distribution of input tax credit of common input services procured from third parties, and clarifying the taxability of inter-office billing between distinct persons. Here, interestingly and to utter surprise, the Council has also recommended an amendment in the GST law to make the ISD mechanism mandatory prospectively for the distribution of input tax credit of common input services procured from third parties. This industry would need to revisit their tax positions and the processes in line with the clarificatory circular and proposed amendment in the Act.

The Council continued its efforts to rationalise the GST rate for specific goods by reducing the rate on uncooked/ unfried snack pellets, imitation zari thread, LD slag, etc. Also, the Council has proposed certain changes with respect to the levy of GST on services like exemption to satellite launch services supplied by private sector entities, removal of the annual declaration by GTA in respect of payment of tax under forward charge, etc.

Last but not least, the Council continued to recommend measures for facilitation of trade and measures for streamlining compliances in GST, with a focus on curbing registrations by unscrupulous entities and a more stringent credit matching mechanism.

Considering the number of clarifications as per the press release on recommendations made by the GST Council and the progress on important issues such as setting up of GSTAT and recommendation of tax structure on the online gaming sector, the 50th meeting of the GST Council indeed turned out to be worthy of the landmark. The industry would now await the fine print of circulars, notifications and proposed amendments in law.

Source: Tax Sutra