Union Budget 2024: Anticipating key GST reforms and industry impact

The latest GST council meeting, held on 22 June 2024 set the stage for the announcements in the upcoming budget. The Council delved into multiple industry issues and addressed many matters, largely in favour of the industry.

It is that time of the year again when industries, economists, financial advisors, and the taxpayer community eagerly await the announcements from the Hon’ble Finance Minister. The focus of the Modi 3.0 administration continues to be on fiscal consolidation. 

Significant Goods and Services Tax (GST) related announcements and recommendations are made periodically through the GST Council meetings held this year. The latest GST council meeting, held on 22 June 2024 set the stage for the announcements in the upcoming budget. The Council delved into multiple industry issues and addressed many matters, largely in favour of the industry. However, it is crucial to review the fine print of the specific changes in the laws, including notifications and circulars. 

Several changes were recommended, to give effect to which, the GST law would need to be amended. Some of the salient ones having a major impact on the industry include:

1. Proposed introduction of section 11A in the CGST Act

This provision would empower the Government to regularise non/short levy of tax due to common trade practices:Multiple industries would look forward to regularising their ongoing disputes involving industry practices under this provision (e.g. foreign airlines, shipping companies, online gaming companies, etc).

2. Retrospective amendment in section 16(4) of the CGST Act

This proposes an extension in the last date for claiming input tax credit (ITC) for FY2017-18 to FY2020-21 to 30 November 2021:The industry is looking forward to understanding the fate of ITC, which was either not claimed or reversed after claiming due to delayed claim, pertaining to this period.

3. Amnesty scheme under proposed section 128A of the CGST Act:

This is one of the most awaited provisions in the GST law, where interest and/or penalty are to be waived on a conditional basis for tax demands without alleging fraud, etc. for the period FY2017-18 to FY2019-20 if the taxpayer pays the full amount of tax demanded in the notice by 31 March 2025. The industry would look forward to seeing how the specific issues, such as for demands involving multiple periods; and reductions in demands or acceptance of demand only on some issues in a notice, etc.; are addressed.

In addition to the above, some matters, not specifically mentioned by the GST Council,but requiring resolution, are: 

1. Online gaming industry
The levy of 28% GST on the amount deposited by players without distinguishing between a “game of chance” and a “game of skill” has been a significant concern. The industry has represented on several occasions that the GST should only apply on the commission/ fee income and not the amount deposited (or bet value, as per ongoing disputes for past periods). Can disputes from the past period be resolved by accepting industry practices under the proposed Section 11A?

2. Multiplicity of investigating authorities:
There are instances wherein for thesame issueor period, multiple authorities have initiated an enquiry or proceeding against a taxpayer. Section 6(2)(b) of the CGST Act is sufficiently clear that where a proper officer has initiated an enquiry or proceeding, any other officer is precluded from initiating a proceeding in the said matter. This is a major area of concern for the industry, required to be addressed immediately by issuing detailed guidance (which should be followed in letter and in spirit) to avoid duplicity of proceedings. 

3. Norms to avoid penalising the buyer for non-compliance of the seller:
An essential condition toavail ITC is that the seller should have deposited the tax so collected. However, there is no mechanism for a buyer to ascertain this, placing, an unreasonable burden on them. The Government should provide a mechanism to validate such information by buyers or do away with such an unreasonable condition.

Certain expectations under customs are as follows:

1.Clarity on the availability of MOOWR benefit for the solar sector
Vide Instruction no. 13/2022 – Customs dated 9 July 2022, it was stated that MOOWR benefit will not be available to power generating units. However, the Delhi High Court in case of ACME Heergarh Powertech Private Limited has quashed the aforesaid instruction, specifically concerning the cancellation of the licenses already issued and specifically commented about the invalidity of the overall instructions. Considering the Government’s push towards renewable energy, the removal of such restrictions and allowing the benefits under the MOOWR scheme to the solar power generating companies is recommended. 

2.Introduction of amnesty/settlement scheme for Customs disputes
While there have been schemes to settle disputes under historical indirect taxes and an amnesty scheme is also now proposed under the GST law, it is high time for the Government to bring an amnesty/settlement scheme for Customs disputes to further reduce the number of ongoing disputes. 

All eyes would now be on the speech of the Hon’ble FM on 23 July to see how many of the above industry demands are met. As the laws stabilise, the list of expectations will positively reduce in theupcoming years.

Source:- Business Today