As the 54th GST Council Meeting approaches on September 9, 2024, in New Delhi, many are eagerly waiting to see what changes might come. Business leaders and industry groups are hoping that the meeting will address important issues and bring some clarity to tax rules. With several key topics up for discussion, this could be a turning point for the country’s financial system. Everyone is watching closely, expecting reforms that could make a big difference.
Siddharth Surana, Director, RSM India, a tax, risk advisory and consulting firm, shared some of the critical areas, where industry stakeholders are looking for clarity and reform:
1. Operationalisation of the GST Appellate Tribunal Mechanism: The recent formation of the GST Appellate Tribunals is a significant step towards streamlining dispute resolution under GST. However, the administration and effective operationalisation of these Tribunals needs to be sped up.
The GST Council must steadfastly address the issues so that the Tribunals are operationalised and running efficiently. The dispute resolution under the GST mechanism has been on hold due to delays in operationalisation of GST Tribunals as aggrieved taxpayers have not been able to file appeals and seek relief against orders passed by the Commissioner (Appeals).
2. Rate Rationalisation: Discussions around the reduction of the current four major GST slabs (5%, 12%, 18%, and 28%) to possibly three slabs have been ongoing for a while now. Such a move could simplify the tax structure and reduce compliance burdens, but may also have inflationary pressures.
Businesses are keenly watching for any developments in this area, as a streamlined rate structure could have significant implications for pricing and profitability. We expect that as rate setting is a complex exercise and would require examination of macro-economic and specific industry considerations, it is unlikely that this issue will get addressed in the Council Meetings, but we may hear some announcements regarding the progress on this proposal.
3. Taxation Scheme for Tobacco and Tobacco Products: The GST Council had, in the earlier Council meetings, constituted a Group of Ministers to look into capacity-based taxation for commodities like pan masala and gutka. There is an issue of tax evasion in these products and it was proposed to introduce a tax based on maximum retail prices of these commodities and to shift the burden of taxation to the manufacturing stage.
The Group of Ministers felt that efforts should be focused on maximising GST collections at the first stage of manufacture as the leakages were found to be concentrated at the retailer levels. There are also proposals to issue notifications to restrict the refund on exports of these items.
Recently, the GST Network has implemented a special procedure for pan masala, and gutka manufacturers to register their machines with tax authorities. GSTN on May 16 informed the taxpayers that the online facility for such manufacturers to submit their machine-related information through form GST SRM-I has been introduced on the GST portal.
4. GST on Transactions Between Foreign Branch Offices: Recent controversies have arisen over GST notices issued to foreign airlines and companies like Infosys, regarding GST on import of services between foreign branch offices. There is hope that the government will provide relief or clarification on this issue to prevent further disputes and ease the burden on affected businesses.
5. Discontinuation of the Compensation Cess Mechanism: The continuation of the Compensation Cess mechanism has been a contentious issue. With the current arrangement already extended several times, there is a need to discontinue the mechanism of GST compensation i.e. Compensation Cess.
The Council may discuss alternatives that balance the fiscal autonomy of States with the need for a unified tax regime. Further, a Compensation Cess is imposed over and above the GST on products falling within the 28% slab. These products generally include aerated beverages, cigarettes, motor vehicles and several others, popularly called as “sin goods”.
With the discontinuation of Compensation Cess which is a possible agenda item in the Council meeting, there may also be a need to re-look at the rates on these sin goods.
6. Online Gaming Taxation: The government’s firm stance on imposing a 28% GST on online gaming activities has raised concerns within the industry. Despite recent amendments to the Act, it seems unlikely that this issue will be resolved at the upcoming Council Meeting. It is expected that further industry representation and legal discourse would be necessary to address the concerns of stakeholders in this sector.
Past Trends
The GST Council in its meeting in August 2023 had clarified that online gaming platforms were required to pay 28 per cent tax and subsequently Central GST law was amended to make the taxation provision clear.
Offshore gaming platforms were also mandated to register with GST authorities and pay taxes, failing which the government would block those sites.
The Council had then decided that the taxation on the online gaming sector would be reviewed after six months of its implementation.
The Council in June meeting took a host of taxpayer-friendly measures including waiver of interest and penalty for demand notices issued in the first three years of GST — 2017-18, 2018-19 and 2019-20, if the full tax demanded is paid by March 31, 2025.
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