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In a move poised to significantly impact the business landscape, the Goods and Services Tax (GST) Council, during its forthcoming meeting on June 22, is set to deliberate on a proposal to lower the upfront payment for filing a tax appeal from the current 10% to 7% of the disputed tax amount. This potential reduction aims to alleviate the financial strain on businesses embroiled in tax disputes, according to sources consulted by the Economic Times.

Moreover, the Council is likely to explore the introduction of an amnesty scheme targeting disputes predating the GST regime. This initiative, coupled with a proposal to mandate biometric-based Aadhaar authentication for individuals flagged as suspicious in their GST registration applications, underscores a dual strategy of fostering compliance while easing the litigation burden on the judiciary.

Officials have indicated that the amnesty scheme, upon receiving the Council’s approval, may be formally announced in the upcoming budget. This follows the interim budget’s provision of an amnesty for minor direct tax disputes involving sums up to ₹ 25,000. Despite states and the central government possessing the autonomy to independently implement amnesty schemes for pre-GST conflicts, a coordinated approach discussed at the Council level is anticipated to standardize and streamline execution across jurisdictions. Historical precedents have seen states independently introducing amnesty schemes for state taxes, but a unified strategy is now being advocated.

Saurabh Agarwal, a tax partner at EY, emphasized the business community’s strong advocacy for prioritizing an amnesty scheme to resolve tax disputes stemming from the GST’s implementation. Such a scheme would offer businesses an opportunity to settle past tax issues without incurring severe penalties, thereby lessening the caseload on the courts.

In addition to these measures, the Council is also expected to address the nuances of pre-deposits in instances where industries have already made preliminary deposits prior to contesting tax demands. This approach aims to streamline the appeals process and enhance operational efficiency.

A senior official remarked that forthcoming decisions would aim to bolster the ease of doing business while simultaneously intensifying scrutiny for high-risk taxpayers. The official noted the successful pilot implementation of biometric-based Aadhaar authentication in Gujarat, Andhra Pradesh, and Puducherry. Given this success, the Council may consider extending this mandatory authentication requirement nationwide for individuals deemed suspicious or high-risk in their GST registration attempts.

These deliberations and potential reforms reflect the Council’s ongoing commitment to balancing regulatory rigor with business facilitation, ensuring a robust yet supportive tax environment.

In a landmark decision, the Jharkhand High Court has unequivocally stated that GST officers must refrain from compelling individuals summoned under GST to provide statements beyond official working hours.

The division bench, composed of Acting Chief Justice Shree Chandrashekhar and Justice Navneet Kumar, articulated with clarity, “It is our firm conviction that GST officials should neither mandate nor coerce individuals summoned to offer statements after the designated office hours.”

Counsel for the petitioner, Salona Mittal, invoked Section 50 of the Prevention of Money-Laundering Act, 2002, drawing parallels to Section 70 of the GST. Mittal referenced the Supreme Court’s interpretation in the seminal case “Vijay Madanlal Choudhary v. Union of India” (2022 SCC OnLine SC 929). The apex court had discerned that officers under the PMLA are not equivalent to police officers and do not wield powers under the Code of Criminal Procedure. It was determined that individuals summoned under Section 50 are not deemed accused, and their statements do not constitute confessions, thus they are not shielded by Article 20(3) of the Constitution.

Mittal further highlighted the FAQs on Goods and Services Tax available on the CBIC website, which stipulate guidelines for issuing summons and outline the necessary precautions. Additionally, the GST Intelligence and Investigation Manual, 2023, meticulously delineates procedures for interrogations and the recording of statements, underscoring the imperative that such activities occur during office hours.

The Court took cognizance of the GST Intelligence and Investigation Manual, 2023, which elaborates on procedures for interrogation, statement recording, preparation, questioning techniques, managing hostile witnesses, retraction, judicial interpretations, and necessary precautions. Specifically, clause (iv) to paragraph 5.142 of the manual mandates that statements should be recorded within office hours.

Nevertheless, the Court acknowledged the interpretation by the Commissioner (GST-Investigation) regarding the term “exception” in clause (iv), permitting after-hours statements in exceptional scenarios, such as the risk of absconding or imminent arrests.

Ultimately, the Court directed GST officers to scrupulously follow the guidelines and instructions issued by the Commissioner (GST-Investigation) and the CBIC when summoning individuals under Section 70 of the GST Act.

New Delhi: The formidable GST Council is set to reconvene on June 22, marking its first assembly in eight months and the inaugural meeting since the NDA government reclaimed office. This session promises a dynamic agenda, with pivotal issues such as the tax implications on online gaming—a subject vigorously championed by an influential lobby—likely to feature prominently. However, the meeting may also witness intense debates, particularly as opposition-governed states perceive a weakened central government post the recent electoral mandate.

Despite the BJP’s strengthened position, having secured victories in the Congress-led states of Rajasthan, Chhattisgarh, and Odisha, alongside its ally TDP reclaiming Andhra Pradesh, the political landscape remains contentious. Union Finance Minister Nirmala Sitharaman, with state and UT finance ministers present, will seek crucial inputs for the upcoming Budget.

While the meeting’s agenda remains under wraps, there is heightened anticipation around revisiting rate rationalisation. Previously, recommendations by a ministerial group led by former Karnataka CM Basavaraj Bommai were left unimplemented. Now, under the new chairmanship of Uttar Pradesh Finance Minister Suresh Khanna, these recommendations may re-emerge for consideration.

ITC CMD Sanjiv Puri, the newly appointed president of the industry chamber CII, emphasised the potential inclusion of sectors like petroleum and real estate within the GST framework, advocating for a simplified three-slab structure. As the GST regime approaches its seven-year milestone, there is a growing chorus for reducing the number of slabs and adjusting rates—an agenda the Council had previously deferred.

The impending GST Council meeting is poised to address critical rate rationalisation discussions and consider integrating low-impact petroleum products, such as natural gas, into the GST domain, which would significantly benefit businesses. According to M S Mani, partner at Deloitte India, the current stability in GST collections, coupled with the independence of GST changes from Union Budget proposals, should empower the Council to tackle various outstanding issues.

The industry has highlighted challenges such as inverted duty structures and classification inconsistencies, advocating for rate rationalisation. Abhishek Jain, KPMG’s indirect tax head, anticipates the meeting will clarify numerous issues, including the taxability of online gaming, ESOPs, corporate guarantees, and recent litigations. Businesses are also keenly awaiting new regulations on Input Service Distributor and their implementation timeline.

In conclusion, this pivotal GST Council meeting holds the promise of significant developments and strategic decisions, crucial for the future of India’s tax regime and economic landscape.

MUMBAI: In a decisive ruling by the Gujarat Authority of Advance Ruling (AAR), the case of Bhagat Dhanadal Corporation has been adjudicated, establishing a 5% GST rate on its manufactured seed mixes. The corporation’s products, specifically ‘Mix Mukhwas’ and ‘Roasted Til with Ajwain,’ are under scrutiny. The AAR bench meticulously noted that these items predominantly comprise sesame seeds, which constitute 60% of the former and a substantial 97% of the latter.

The core of the ruling hinges on the detailed composition and processing of these products. Despite undergoing processes such as cleaning, salting, citric acid addition, roasting, and turmeric powder inclusion, the classification remains unchanged as sesame seeds retain their status as the principal ingredient. The applicant has clarified that the seed mixes are devoid of pan masala, sugar, chocolate, preservatives, or artificial flavoring substances, thus appealing to consumers who prefer natural seed mixes.

In light of these considerations, the AAR concluded that a GST rate of 5% is applicable. This ruling underscores the authority’s commitment to maintaining tax consistency and clarity, reflecting a significant stance in the ongoing discourse of GST classifications. The decision resonates particularly with stakeholders monitoring the economic implications of GST on niche food products.

On June 22, the GST Council will convene its 53rd meeting in New Delhi under the leadership of Finance Minister Nirmala Sitharaman, marking the first such gathering since the recent General Election. The Council is poised to tackle several pivotal taxation issues, including the contentious 28% GST imposed on online gaming, casinos, and horse racing. This meeting is set against a backdrop of significant legislative changes and heightened scrutiny, as stakeholders await potential rate rationalizations and adjustments to the inverted duty structure affecting various sectors.

A prominent agenda item involves revisiting the 28% GST on online gaming, casinos, and horse racing, a decision rooted in the Council’s July 11 resolution from the previous year. Despite opposition from certain states, the Council upheld this tax rate, subsequently enacting legislative amendments that triggered a surge in show-cause notices. The government’s stance remains firm, asserting that these amendments are merely clarificatory, reinforcing the rate’s applicability since July 1, 2017. However, online gaming companies contend that the retrospective application has precipitated a wave of compliance challenges.

Another critical issue on the docket is the anticipated rate rationalization. A Group of Ministers (GoM), led by Uttar Pradesh’s Finance Minister Suresh Khanna, has been deliberating on this matter, though their final recommendations are still forthcoming. The GoM’s composition may also see changes, given that one of its members, Vijay Kumar Sinha, no longer holds the Finance portfolio in Bihar.

Addressing the inverted duty structure remains a priority, particularly for sectors like textiles and fertilizers. Previous attempts to rectify the imbalance in the textile sector faced significant political resistance, leading to a temporary halt. Nonetheless, the Council may announce relief measures for fertilizer companies, potentially through a circular facilitating refunds due to the inverted duty structure and subsidies.

Industry experts are closely monitoring these developments. MS Mani, Partner at Deloitte India, underscores the potential benefits of incorporating low-impact petroleum products such as natural gas into the GST framework, highlighting the stability in GST collections as a motivating factor for the Council to address lingering issues. Rajat Bose, Partner at Shardul Amarchand Mangaldas & Co, emphasizes the need to revisit the taxation of online gaming and review the valuation rules instituted in October 2023. Abhishek Jain, Partner at KPMG in India, notes that the taxability of ESOPs, corporate guarantees, and various rate-related clarifications are likely to feature prominently in the discussions, alongside new regulations on Input Service Distributors (ISD) and their implementation timeline.

As the GST Council prepares for this crucial meeting, stakeholders across various sectors await the outcomes with keen interest, anticipating that the resolutions will provide much-needed clarity and stability to the evolving tax landscape.

The Ministry of Petroleum and Natural Gas (MoPNG), under the leadership of Oil Minister Hardeep Singh Puri, is initiating efforts to bring petrol, diesel, and aviation turbine fuel (ATF) under the Goods and Services Tax (GST) regime. This ambitious move seeks to integrate these vital fuels into the GST framework, a measure long advocated by various political entities as a means to alleviate fuel prices for consumers.

Minister Puri, in collaboration with the Minister of State, Suressh Gopi, emphasized their commitment to this initiative. “We will endeavor to achieve this,” stated Puri, underscoring the Ministry’s proactive stance. The procedural roadmap involves MoPNG forwarding a recommendation to the Finance Ministry, which would then present the proposal at the GST Council meeting.

The inclusion of crude oil, petrol (MS), diesel (HSD), ATF, and natural gas under GST is not without precedent. However, the critical step lies with the GST Council, which must designate the effective date for levying GST on these products. Currently, the Centre imposes excise duties while states levy VAT and sales taxes on auto fuels, resulting in varied tax burdens across regions.

The integration of these fuels into the GST framework promises significant economic benefits, primarily through price reduction, thus easing the financial burden on the general populace. Despite widespread political endorsement, consensus within the GST Council remains elusive due to concerns over potential revenue losses for both state and central governments. The petroleum sector’s substantial contribution to the exchequer—approximately ₹7.51-lakh crore in FY24, with the Centre and states receiving ₹4.32-lakh crore and ₹3.18-lakh crore respectively—highlights the stakes involved.

Another complex factor is the current tax rates on petrol and diesel, which exceed the GST cap of 50 percent, including cess. For instance, as of March 16, 2024, the tax on diesel stands at 50.76 percent, while petrol is taxed at 63.4 percent. Aligning these rates with the GST framework, without disrupting the revenue neutral rate (RNR) principle, poses a significant challenge.

In a related development, Minister Puri reaffirmed the government’s stance on maintaining its stake in oil marketing companies (OMCs), dispelling speculations following the aborted divestment of Bharat Petroleum Corporation (BPCL) in June 2022. Addressing queries about securing long-term crude oil supply agreements with Russia, Puri expressed confidence in the economic feasibility and long-term sustainability of such deals for both private and public sector entities.

This strategic endeavor marks a pivotal step in the government’s broader objective to streamline taxation and enhance economic efficiency within the petroleum sector, fostering a more predictable and stable pricing environment for essential fuels.

In the realm of Indian equity markets, the Nifty index has soared to unprecedented heights, reaching a pinnacle at 23,323, buoyed by substantial gains in heavyweight stocks. This surge, however, has been accompanied by a strategic maneuver by mutual funds (MFs), particularly notable in their divestment from public sector undertakings (PSUs) preceding the anticipated general election outcomes.

Throughout the month of May, MFs demonstrated a concerted effort in reallocating resources, divesting a staggering Rs 47,600 crore into equities, with a discernible focus on shedding investments in select PSUs. Canara Bank, for instance, spearheaded the list of disinvestments, witnessing an estimated withdrawal of Rs 2,270 crore, as per a meticulous report by Nuvama Alternative & Quantitative Research.

An intriguing trend surfaced as nine PSUs featured prominently among the 30 most sold stocks by fund managers, marking a notable escalation from the preceding month. Noteworthy entities such as Bharat Electronics, Punjab National Bank, and GAIL found themselves amidst the exodus, tallying an aggregate redemption amounting to Rs 9,570 crore.

Conversely, amidst the divestment frenzy, a solitary PSU, the Indian Railway Finance Corporation (IRFC), stood out as a beacon of attraction, representing the lone entity amidst the most-bought stocks in May, with an aggregated MF investment approximating Rs 860 crore. Such discernible market dynamics underscore the intricate dance between investor sentiment and market fundamentals.

Delving deeper into the intricacies of fund management, distinguished entities such as HDFC MF and Quant MF emerged as principal protagonists in the divestment saga, epitomizing a strategic pivot away from PSU holdings. Notably, Quant MF orchestrated a decisive exit from four PSU stocks, whilst HDFC MF divested from a quintet of PSU stalwarts, mirroring a concerted industry-wide sentiment.

Amidst this narrative of strategic reallocation, private bank stocks emerged as vanguards of investor interest, heralding a resurgence in buying momentum after a protracted period of underperformance. Renowned institutions such as HDFC Bank and Kotak Mahindra Bank ascended to the zenith of the buy list, attracting a net investment of Rs 7,600 crore and Rs 3,210 crore, respectively, underscoring a resounding endorsement of their intrinsic value propositions.

Further amplifying this sentiment, stalwarts like Reliance Industries, Infosys, and Larsen & Toubro garnered substantial investor interest, consolidating their positions within the top echelons of investor portfolios. This pronounced affinity towards blue-chip entities elucidates a discernible shift towards quality stocks, characterized by robust financials, compelling growth trajectories, and resilient business models.

In essence, as the market landscape undergoes a nuanced metamorphosis, characterized by shifting tides of investor sentiment and evolving market dynamics, the overarching narrative coalesces around the primacy of quality amidst the cacophony of market exuberance and speculative fervor. It is within this crucible of discernment and strategic foresight that the contours of prudent investment strategies are delineated, heralding a new era of market sophistication and astute portfolio management.

In a robust appeal for the advancement of India’s burgeoning online gaming sector, the Skill Online Games Institute (SOGI) has underscored the imperative for informed GST deliberations to secure the industry’s sustainable growth. Spearheading this advocacy, SOGI’s President, Amrit Kiran Singh, illuminated the detrimental repercussions of the current high tax regime, which he asserts has precipitated the exit of domestic players and inadvertently bolstered the position of international competitors.

Amrit Kiran Singh, who stands at the helm of SOGI, a pivotal institution in the online gaming arena, vociferously articulated the need for a re-evaluation of the 28 percent GST imposed on online gaming. This call to action, directed at the Centre and the GST Council, is rooted in the conviction that a recalibrated tax structure is essential for enabling the domestic industry to flourish and hold its ground against global counterparts.

Reflecting on a prior commitment from the Finance Ministry, Singh highlighted Finance Minister Nirmala Sitharaman’s assurance of a GST rate reassessment post-elections. He stressed the criticality of this review being predicated on a comprehensive understanding of both the domestic and international online gaming landscapes. Since the imposition of the hefty 28 percent GST in October last year, the Indian online gaming industry has witnessed significant attrition, with numerous domestic entities being compelled to exit the market.

The Indian online gaming market, valued at over USD 3.5 billion and exhibiting an impressive compound annual growth rate of 35 percent over the past five years, stands as a testament to its potential. Employing over two lakh individuals, the sector is poised for exponential growth, contingent upon a conducive tax environment. Singh cautioned that the current taxation paradigm disproportionately favours foreign entities, particularly from China, where online gaming enjoys a tax-exempt status.

Singh’s plea is clear: to bolster India’s economic growth, domestic gaming companies must be empowered to compete on a global stage. He advocates for a tax framework that mirrors those of leading economies like the US, the UK, and China, ensuring Indian companies, with their robust IT expertise, are not disadvantaged. SOGI, in its strategic partnerships with esteemed institutions like the University of Oxford, IITs, and IIMs, is diligently working to address both technical and legal facets of online gaming regulations.

Further substantiating their position, SOGI’s report reveals intriguing insights into the consumption patterns of indoor entertainment, particularly in West Bengal. The state has consistently outpaced the national average by 25 percent over the past four years in time spent on indoor entertainment. Notably, this peaked during January-April 2020, with an average daily engagement of 3.5 hours, gradually tapering to 1.8 hours by the close of 2023.

The call from SOGI and its president, Amrit Kiran Singh, is unequivocal: a well-informed, nuanced approach to GST policy is crucial for the sustained growth and global competitiveness of India’s online gaming industry.

Finance Minister Nirmala Sitharaman, poised for her second term, returns to the North Block with a formidable agenda, starting with the presentation of the full Union Budget for the fiscal year 2024-25. Her immediate and pressing challenge lies in curbing retail food inflation.

As the first full-time female Finance Minister, Sitharaman, 65, has the distinction of presenting six budgets, including an interim one for FY25. Adhering to tradition, the interim budget focused solely on vote-on-accounts. Now, all eyes turn to the comprehensive budget where she is expected to lay out a five-year vision accompanied by significant policy announcements. A key focus will be addressing unemployment through strategies aimed at invigorating the manufacturing sector.

On the fiscal front, Sitharaman benefits from a record surplus transfer from the Reserve Bank of India and robust tax collections, offering her a strategic advantage in managing the fiscal deficit. She faces a pivotal decision: either to reduce the fiscal deficit target of 5.1 percent proposed in the interim budget by at least 10 basis points or maintain the target and amplify public expenditure. Economists widely advocate for the latter, emphasizing the need to boost consumption.

Continuing her focus on capital expenditure, an allocation of ₹11.11 lakh crore has been earmarked in the interim budget. Although this figure is expected to remain unchanged in the full budget, Sitharaman is likely to channel additional funds towards capital expenditure in the remaining years of the Modi 3.0 administration.

Reflecting the BJP manifesto, Sitharaman is anticipated to enhance the Production-Linked Incentive (PLI) scheme or introduce innovative measures to bolster manufacturing. The manifesto envisions India as a global leader in automobile, electric vehicle, textile, and electronics manufacturing by 2030, promising to expand employment in these critical sectors.

Addressing retail food inflation is another immediate concern. Despite headline inflation hovering around 5 percent, soaring prices of vegetables and edible oils pose significant challenges. The Finance Minister is expected to introduce measures to boost horticultural production and expand cold storage facilities. While initiatives to promote oilseed production have shown progress, further efforts are necessary.

A long-standing issue on Sitharaman’s agenda is GST rate rationalization. This complex exercise, aimed at resolving the inverted duty structure, particularly in the textile sector, could shift items into higher tax brackets, potentially impacting inflation. Previous attempts to address this issue faced resistance, not only from the opposition but also from BJP-ruled states, leading the GST Council to defer its recommendations.

Another significant challenge for Sitharaman is revising the new pension scheme. A committee led by Finance Secretary T V Somnathan is currently deliberating on this matter, with recommendations expected to be disclosed soon.

In her second term, Sitharaman’s strategies and policy decisions will be crucial in steering India towards sustained economic growth, addressing inflation, and creating employment opportunities, ultimately shaping the nation’s financial landscape for the future.