The Council’s recommendations encompass a wide array of initiatives, starting from rationalization of GST rates on various goods and services and regularizing the past period on ‘as-is where-is basis’ to avoid any future litigation like in case of film distribution service, provide exemptions on research and development services and reducing tax rates on cancer drugs.
The GST council also brought about changes in the law and rates to rectify unintended levies and demands starting with exempting import of services by an establishment of a foreign airlines company from a related person outside India, when made without consideration and regularizing past cases on an ‘as is where is’ basis thereby putting to rest the huge demands that were raised on foreign airlines in the recent past. Further, clarifying the place of supply in case of advertising services and data-hosting services when provided to foreign entity to be the location of recipient thereby to be treated as export of services, are all decisions that will help resolve multiple ongoing litigations and provide the much-needed relief to the respective industries.
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Another key outcome of the council meeting was the formulation of two new GoMs which have been created to find possible solutions to some critical issues, namely – GoM on life and health insurance and GoM to study the future of compensation cess with the mandate to present their findings by Oct 24 end to enable the council to deliberate on the same and achieve consensus.
GoM has further made an effort to streamline the metal industry by accepting their long standing demand of making the payment on reverse charge for supply of metal screap from unregistered dealers. However, given that intermediate dealers may be unregistered there is a possibility of substantial cascading in certain situations. Accordingly, the fine print is awaited to understand the complete implications.
The introduction of e-invoicing for B2C transactions is a major step towards streamlining compliances and moving towards refunds for goods purchased and exported by foreign tourists. Also, the IMS system is a major step to bring efficiency in credit availment and was proposed in the initial implementation of the GSTN portal, but deferred due to technical issues. However, there is a need to make explicit provisions under law to give it a legal backing. Both these changes will take compliances to a new level and would bring maturity to the current GST processes.
Here’s everything Finance Minister Sitharaman and the GST Council decided
With every meeting, the council takes a step towards streamlining and resolving disputes under the GST law. While a lot has already been achieved by the Council, the same is a continued journey of democratized decision making. While the decisions taken by GST Council are a testament to the government’s commitment to fostering a conducive business environment, it is the need of the hour that the council develops a long-term vision for this tax.
There are two main areas which require council’s immediate attention – the first is re-evaluation of ITC admissibility, which will not only require a complete re-look at Section 17(5) of GST law which restricts credits in some cases but also look at sectors where credits have been restricted to keep the rates low.
The second area which requires immediate attention is the multiplicity of audits, assessment and investigations being carried out on large corporates across the country. Multiple organizations, as part of their revenue augmentation targets, audit and investigate the corporates, most of them having multiple registrations in various jurisdictions. It is time that the council re-formulate the audit process to have centralised coordinated audits with possible rotation between centre and state.
The GST Council’s proactive approach in addressing the concerns of industry is a reassuring sign of the government’s dedication to making India an easier place to do business. The nation now looks forward to the findings of the GoMs which are set to pave the way for a more streamlined and efficient tax system, ultimately contributing to the overarching goal of ease of doing business in India.
(Bipin Sapra is a Tax Partner at EY India. Swati Saraf Pahuja, Senior Tax Professional, EY India also contributed to the article)
