The GST Council is set to meet on June 22, 2024, in New Delhi, and anticipation is high. Although the official agenda remains under wraps, state finance ministers are expected to suggest reforms for the indirect tax regime to be considered in the upcoming Union Budget.
Industry Expectations
The industry is eager for discussions on restructuring the complex multiple-rate tax system, given the significant rise in GST revenue. A critical review of the 28% levy on online games, horse racing, and casinos is also on the table.
Inverted Duty Structure
One of the key issues is the inverted duty structure, which burdens businesses with cash flow problems and accumulates Input Tax Credit (ITC) that’s tough to utilise. Experts believe the Council will focus on sectors like textiles, footwear, and fertilisers to resolve these issues.
Shivam Mehta, Executive Partner at Lakshmikumaran & Sridharan Attorneys, remarked, ‘The entire industry is counting on the new coalition government for relief from the hardships faced post the introduction of the new rule for valuation of corporate guarantees.’
Inclusion of Petroleum Products
Finance Minister hinted at ongoing discussions about including petrol, diesel, ATF, natural gas, and selected petroleum products under GST. The outcome depends on consensus between the Centre and the states.
Past Meeting Highlights
At the last meeting on October 7, 2023, the Council discussed a ‘perspective plan’ to impose a cess or surcharge on top of GST levies after March 2026, when the GST Compensation Cess is set to expire. Future meetings will continue these discussions.
Key Issues to Watch
Amnesty Scheme for Tax Disputes: Businesses are urging for an amnesty scheme to clear GST-related tax disputes. ‘Delays are causing a backlog of litigation,’ said Saurabh Agarwal, Tax Partner at EY.
Compliance and Ease of Doing Business: The Council may review GST compliance provisions, including the lack of facility to file revised returns. Rajat Bose, Partner at Shardul Amarchand Mangaldas & Co, emphasised the need for reforms to benefit taxpayers.
GST on Online Gaming: The Council is expected to address the 28% GST on online gaming, casinos, and horse racing. Previously, online gaming was taxed at 18% on platform fees, but the higher rate on certain services needs clarification.
Rate Rationalisation: There’s a strong expectation for overhauling the four-tier GST rate structure of 5%, 12%, 18%, and 28%. Smita Singh, Partner at S&A Law Offices, highlighted this as a pressing issue.
Sector-Specific Concerns
Pharmaceuticals and EVs: Inputs for medications and EVs attract higher GST rates than the final products, leading to capital blockages.
Automobiles: Companies are hoping for a reduction in the 28% GST on scooters and motorcycles, arguing these are not luxury items but essential for lower-income groups.
Revenue Growth
GST collections for May 2024 reached ₹ 1.73 lakh crore, a 10% year-on-year growth. April 2024 saw record collections of ₹ 2.10 lakh crore, driven by a 15.3% increase in domestic transactions despite a 4.3% slowdown in imports.
The upcoming GST Council meeting promises to be a critical one, addressing key issues that could significantly impact various industries and the broader economy.
