Author: admin

India’s corporate sector is expressing growing concerns over the complexity of multiple Goods and Services Tax (GST) assessments and audits across different states. This pressing issue, which significantly complicates compliance efforts for companies operating nationwide, calls for a streamlined approach to GST assessments.

Revenue Secretary Sanjay Malhotra emphasized the need for industry advocacy at the state level to address these concerns. He acknowledged that despite the ‘One Nation One Tax’ principle, the reality is far from unified, with companies facing up to 30 different state assessments. The Finance Ministry, recognizing the burden this places on businesses, is also committed to engaging with states to seek resolutions.

Malhotra’s remarks came during a post-Budget interactive session organized by the Confederation of Indian Industry (CII) in the Capital. He underscored the complexity of the issue, noting that reducing the number of assessments from 30 to one requires a concerted, collaborative effort with all stakeholders involved.

In response to a query from a top official at Cavinkare, who highlighted the inefficiencies of the current system, Malhotra admitted that an immediate solution is not feasible. Instead, he stressed the importance of continuous dialogue and incremental progress in addressing this multifaceted challenge.

Budget Priorities: Taxpayer Focus and Simplification

The Union Budget’s primary focus has been on the taxpayer, with proposals aimed at rationalizing and simplifying the tax system, enhancing competitiveness, and reducing compliance burdens. Malhotra highlighted the government’s commitment to a consultative and collaborative policy-making process, ensuring that taxpayer trust is maintained and valued.

Industry-Government Partnership in Tax Law Review

The government is keen on partnering with the industry for the comprehensive review of the Income Tax Act of 1961. Malhotra emphasized a collaborative approach, inviting industry input to ensure the review process benefits from diverse perspectives and expert insights. This collaborative spirit was reflected in CII Director-General Chandrajit Banerjee’s willingness to contribute to the consultation process, highlighting the Finance Minister’s commitment to reviewing the Income Tax Act within six months as a significant opportunity for constructive industry-government collaboration.

Fiscal Strategy and Investment

The fiscal glide path outlined in the Budget is expected to attract substantial investments, with the industry playing a crucial role. Banerjee expressed confidence in the positive impact of this strategy, emphasizing the value of ongoing industry-government dialogue to optimize outcomes.

Rationalizing Customs Tariffs

CII also proposed partnering with the government to build a joint consensus on rationalizing customs tariffs, aligning with the Budget’s proposals. This initiative aims to streamline tariff structures, fostering a more conducive environment for business operations and international trade.

Expanding the Tax Base

Addressing the question of increasing the tax base, Malhotra acknowledged the complexity of this goal. While India’s combined tax-GDP ratio stands at 18 percent, reflecting a moderate performance given the country’s development level, he anticipates further expansion of the tax base as the economy formalizes. Continued development and economic growth are expected to naturally broaden the tax base, contributing to the nation’s fiscal health.

In summary, transforming GST compliance in India necessitates a collaborative approach, engaging both industry and state governments. Through continuous dialogue, incremental improvements, and a shared commitment to simplifying the Tax framework, India can move closer to realizing the ‘One Nation One Tax’ vision. The proactive engagement of industry stakeholders and the government’s willingness to partner in this endeavor are crucial to achieving these goals and fostering a more efficient and equitable tax system.

Introduction: The Finance Bill dated 23rd July 2024 heralds a significant transformation in GST Demand and Recovery with the introduction of Section 74A, effective from the financial year 2024-25. This amendment, replacing Sections 73 and 74, carries profound implications for taxpayers and the regulatory framework.

Two distinct time limits currently govern the issuance of Show Cause Notices (SCNs) and the passing of Adjudication Orders under Sections 73 and 74. These timelines will remain effective only until the enactment of Section 74A. The following table elucidates the timelines under the current sections compared to the new Section 74A:

Section	Time Limit for SCN Issuance	Time Limit for Order Passing	Applicable Cases
73	33 months	36 months	Non-Fraudulent
74	54 months	60 months	Fraudulent
74A	42 months	54 months (extendable to 60)	All Cases

These time limits are calculated from either the due date for filing the annual GST return or the actual filing date, whichever is later. While this amendment alleviates the department’s burden to prove fraudulent intent, it extends the timeframe for non-fraudulent cases by nine months, imposing a greater burden on genuine taxpayers by prolonging the SCN issuance and order passing periods.

Taxpayer Gains: The deletion of Section 74 presents a notable advantage as the denial of Input Tax Credit (ITC) under Section 17(5) for cases under Section 74 will no longer apply. This change benefits taxpayers by removing ITC denial in specific scenarios.

Additional Amendments: The Finance Bill also proposes removing ITC denial under Section 17(5) for cases under Sections 129 and 130, which pertain to the detention and confiscation of goods during movement. This change further alleviates taxpayer burdens in such instances.

The inclusion of Section 74A appears prominently, mentioned 40 times in the Finance Bill 2024, underscoring its critical importance in the legislative framework.

Section 11A Insertion: Introducing Section 11A is a commendable move, granting the government authority to regularize short payments of GST due to prevalent industry practices, thereby offering clarity and regularity based on subsequent developments.

In cases where SCNs are issued under Section 74A involving fraud, willful misstatement, or suppression of facts to evade tax, the penalty equates to the tax amount. However, if adjudication or appeal stages establish the absence of fraud or misstatement, the penalty reduces to ten percent of the tax, with a minimum penalty of ten thousand.

Penalty Structure: The penalty structure under Section 74A is as follows: a 15% penalty applies when tax and interest are paid before notice issuance, a 25% penalty applies up to 60 days post-notice issuance, and a 50% penalty applies if tax and interest are paid within 60 days of order passing.

Conclusion: Despite GST being in effect since 1st July 2017, the Finance Bill 2024 introduces 44 clauses proposing various amendments based on GST Council recommendations, marking a pivotal evolution in GST legislation and administration.

As the much-anticipated Union Budget 2024 is set to be unveiled by Finance Minister Nirmala Sitharaman, the financial landscape of India stands at a crucial juncture. The upcoming budget holds immense significance, not only for its fiscal measures but also for its potential to steer the country towards economic resilience. This analysis delves into the expectations, key sectors impacted, and strategic insights offered by experts.

Chief Economic Advisor Dr. V. Anantha Nageswaran underscores the critical need for India to generate 8 million jobs annually, a formidable challenge that requires innovative policy measures and robust economic strategies. The economic survey, a precursor to the budget, has laid out a comprehensive roadmap, identifying pivotal challenges and suggesting corrective measures to bolster economic growth and employment.

Anticipations from the Union Budget 2024

The financial markets are abuzz with speculation as to whether Prime Minister Narendra Modi will prioritize fiscal prudence or introduce measures to stimulate demand. Key areas of focus include potential tax cuts, increased infrastructure spending, and initiatives to boost rural demand. Investors are particularly keen on any announcements related to capital gains tax and GST simplifications, as these could significantly impact market dynamics and business operations.

Strategic Implications for Key Sectors

The government is expected to continue its emphasis on infrastructure development, a sector that has seen considerable momentum under the Modi administration. The receipt of a Rs 2.11 trillion dividend from the Reserve Bank of India provides the government with additional fiscal space to potentially loosen its purse strings, further fueling infrastructure projects and ease of doing business initiatives.

Policy Recommendations and Economic Insights

The Global Trade Research Initiative (GTRI) has recommended maintaining the current import duty structure on smartphone components to avoid an influx of superficial assembly plants that rely heavily on imports, thereby contributing minimally to the local economy. This recommendation highlights the delicate balance the government must strike between fostering local manufacturing and maintaining competitive import tariffs.

Political Dynamics and Economic Policies

Congress MP Gaurav Gogoi has criticized the budget preparation process, alleging that it prioritizes the interests of conglomerates like Adani and Ambani over the needs of the middle class and the poor. This political rhetoric underscores the broader debate on equitable economic policies and the allocation of fiscal resources.

Key Announcements and Fiscal Measures

India plans to relax borrowing and investment restrictions on state-owned enterprises, enabling them to diversify into new markets and boost manufacturing. This move aims to create jobs and reduce import dependence, aligning with the broader goal of economic self-reliance. The budget is also expected to introduce guidelines for a Rs. 4,950 crore incentive under the PM-Surya Ghar scheme, aimed at promoting rooftop solar installations.

Sector-Specific Developments

The Economic Survey projects a realistic GDP growth rate of 6.5-7% for FY25, contingent on favorable monsoon conditions. It also emphasizes the need for convergence of efforts across central and state governments to improve the quality of primary education, aligning with the National Education Policy (NEP) 2020 goals.

Financial Sector and Household Investments

Chief Economic Advisor Nageswaran highlights the significant increase in household investments in financial assets, a trend not fully captured in national income data. The registered investor base at NSE has nearly tripled, reflecting a broader shift towards financial market participation among Indian households.

Technological and Environmental Challenges

The survey identifies emerging challenges such as data privacy issues, online frauds, and the integration of artificial intelligence. It calls for a balanced approach to energy security and transition, emphasizing the need for strategic actions to address employment and skill development.

Logistics and Supply Chain Improvements

The implementation of GST has played a crucial role in reducing logistics costs, with trucks now traveling greater distances in shorter times. This has streamlined supply chains and enhanced efficiency across the logistics sector.

Agricultural Policy and Fertilizer Subsidy

The Economic Survey suggests leveraging the ‘Agri Stack’ digital system for better targeting of fertilizer subsidies. This system would ensure that subsidies are directed to identified farmers based on specific parameters, thereby optimizing resource allocation and supporting agricultural productivity.

Conclusion

The Union Budget 2024 is poised to be a strategic blueprint for India’s economic revival, addressing critical sectors and laying the groundwork for sustainable growth. As stakeholders await the detailed announcements, the budget’s success will hinge on its ability to balance fiscal prudence with proactive economic measures, ensuring broad-based development and inclusive growth.

Uber and various other app-based ride-hailing services have sought clarification from the Union Finance Ministry, the Goods and Services Tax (GST) Council, and the Authority for Advance Rulings (AAR) regarding their tax liabilities. This move, as reported by The Economic Times (ET), follows a ruling by the Karnataka AAR exempting the Namma Yatri app from GST.

In the case of Justpay Technologies, which operates Namma Yatri, the Karnataka AAR interpreted the term “through” to mean that merely linking service providers with customers via a digital platform does not constitute a taxable supply or service. Thus, Namma Yatri was not required to pay GST, as its function is limited to connecting auto drivers with passengers and ends once this connection is made.

However, this ruling has caused confusion among stakeholders due to contradictory decisions from the same AAR in other cases. For instance, the Karnataka-based Opta Cabs received a different ruling, and in another instance, the Tamil Nadu AAR ruled that connecting small business owners with customers qualifies as a service, obligating Balat Enterprises to pay GST.

In response to these inconsistent rulings, several app-based mobility providers are seeking clear guidance on their GST obligations. Uber has taken proactive steps by submitting an application for an advance ruling in Karnataka to clarify the GST laws applicable to its operations. The company has also appealed to the Union Finance Ministry and Karnataka GST authorities for definitive guidance on the taxation of their services.

Since January 1, 2022, the GST rate on cab services stands at 5 percent. Service providers, however, have the option to pay GST at 12 percent and avail of the full input tax credit.

This situation underscores the pressing need for uniform and clear tax regulations for app-based services to ensure compliance and avoid any legal ambiguities.

In a significant development, Nazara Technologies has announced that two of its subsidiaries, Openplay Technologies and Halaplay Technologies, have been served with show cause notices from the Director General of GST Intelligence, Kolkata. These notices collectively impose a GST liability of nearly Rs 1,120 crore for the period from 2017-18 to 2022-23.

Openplay Technologies has been slapped with a proposed liability of Rs 845.72 crore, while Halaplay Technologies faces a tax demand of Rs 274.21 crore under the CGST Act, 2017. The crux of the issue lies in the calculation of GST based on the sums pooled by players rather than the gross gaming revenues.

These subsidiaries are currently consulting with legal counsels and tax advisors to chart their future course of action. Despite the substantial tax claims, it is noteworthy that for the quarter ending March 2024, these subsidiaries contributed less than 2% to Nazara’s revenues and less than 1% to its profit.

The GST Council had clarified in August that a 28% Goods and Services Tax (GST) would be levied on the full value of bets placed on online gaming platforms. This clarification has led to a surge in GST claims against online gaming companies. Last year alone, GST officers issued around 71 show cause notices for alleged GST evasion totaling over Rs 1.12 lakh crore during the financial years 2022-23 and 2023-24. Many of these cases are currently pending in court as the companies challenge the notices.

Nazara Technologies, in its filing with the BSE, reiterated its commitment to resolving the matter in consultation with legal and tax experts, aiming to ensure compliance while protecting its business interests.

The impact of these GST claims on the online gaming industry underscores the need for clarity and consistency in tax regulations, as companies navigate the complexities of compliance in a rapidly evolving digital landscape.

In a significant development, the Supreme Court has deferred the hearing on a group of 27 petitions challenging the imposition of retrospective goods and services tax (GST) on real-money gaming companies. The next hearing is scheduled for July 31.

Earlier this year, the apex court consolidated all pending petitions from nine High Courts regarding notices issued by tax authorities, recognizing the need for an “authoritative pronouncement.”

Chief Justice of India (CJI) DY Chandrachud has stated that the cases will be listed on July 31 for further directions, with a potential hearing on a subsequent date. The court also mandated that all parties submit written submissions prior to the next hearing.

In its landmark 50th meeting in July 2023, the GST Council decided to impose a 28 percent tax on the full face value of online gaming, equating it with casinos and horse racing. This new tax regime, effective from October 1, 2023, replaced the previous 18 percent GST on online gaming, abolishing distinctions between ‘games of skill’ and ‘games of chance.

Following this decision, tax authorities issued notices demanding a staggering GST of Rs 1.12 trillion for the fiscal year 2022-23 and the first seven months of 2023-24, excluding interest and penalties. This prompted 30 petitions from real-money gaming companies, 27 of which have been transferred to the Supreme Court from various high courts. The initial petitioners included Head Digital Works, Games24x7, and Baazi Games, with the GST department also appealing a Karnataka High Court verdict.

In a notable instance last September, the Supreme Court stayed the Karnataka High Court’s judgment that quashed a GST notice against Gameskraft Technology for alleged tax evasion amounting to Rs 21,000 crore. By October 2023, central GST officers had detected total evasion of Rs 1.51 trillion.

CJI Chandrachud emphasized that having multiple High Courts address the same issue could lead to conflicting judgments, thus the Supreme Court’s intervention ensures a unified, authoritative ruling. The Centre had also advocated for transferring the petitions to the Supreme Court, underscoring the necessity for a centralized decision.

GST Levy Impact on E-Gaming Industry

The imposition of a 28 percent GST on online gaming marks a critical juncture for the industry. Previously taxed at 18 percent, the new regime brings online gaming on par with gambling activities such as casinos and horse racing. This substantial increase in tax burden is poised to have far-reaching implications on the sector, potentially impacting its financial viability and operational dynamics.

High Court Transfers and Centralization

The consolidation of petitions by the Supreme Court from various High Courts reflects a strategic move to streamline the legal process and avoid disparate rulings. This centralization underscores the complexity and significance of the case, highlighting the need for a singular, authoritative interpretation of the law.

Tax Authority Notices and Industry Response

The issuance of GST notices demanding Rs 1.12 trillion has been a catalyst for widespread legal challenges from the e-gaming sector. The industry’s response, through multiple petitions, indicates the high stakes involved and the potential financial repercussions of the retrospective tax imposition.

Judicial Precedence and Future Implications

The Supreme Court’s stay on the Karnataka High Court’s judgment against Gameskraft Technology is a pivotal moment in this legal saga. This decision not only sets a judicial precedent but also signals the court’s approach to handling similar cases in the future.

Central Government’s Role

The Centre’s request to transfer petitions from the High Courts to the Supreme Court underscores its interest in a centralized resolution. This move aims to ensure consistency and clarity in the judicial process, reflecting the government’s stance on the retrospective GST imposition.

The outcome of this case will be closely watched, as it holds significant implications for the future of the e-gaming industry and the broader interpretation of GST laws. The next hearing on July 31 will be a critical step in this ongoing legal battle.

In the complex process of winding up a company, the Tribunal mandates the establishment of an Advisory Committee. This committee’s primary role is to guide the liquidator through the winding-up proceedings and report to the Tribunal on directed matters.

This committee comprises a maximum of 12 members, including creditors and contributories of the company, or other individuals as deemed appropriate by the Tribunal, considering the company’s circumstances. The formation of this committee involves a meeting where creditors and contributories recommend its members. The liquidator subsequently files a report in Form No. WIN 23 to the Tribunal detailing the meeting and the recommended members. In cases of disagreement, the liquidator can seek the Tribunal’s intervention regarding the committee’s composition. The Tribunal will schedule a hearing, and the liquidator must issue a notice to non-consenting contributories in Form WIN 24 at least seven days before the hearing. During the hearing, the Tribunal decides on the committee’s membership or issues relevant directions.

The Advisory Committee is empowered to inspect the company’s books of accounts, documents, assets, and properties at reasonable times. Meetings of the committee are presided over by the Company Liquidator.

Addressing Vacancies within the Advisory Committee

If a member becomes insolvent, arranges with creditors, or misses five consecutive meetings without permission, their position becomes vacant. Members can be removed by an ordinary resolution at a creditors’ or contributories’ meeting, with a seven-day notice specifying the meeting’s purpose. To fill a vacancy, the liquidator convenes a meeting of contributories or creditors to pass a resolution. The Advisory Committee must always have at least two members. If filling the vacancy is deemed unnecessary, the liquidator can seek the Tribunal’s directive. Should the creditors or contributories fail to fill the vacancy, the liquidator must report this to the Tribunal, which may then appoint a member.

Regulations on Advisory Committee Members (Rule 39)

Members, including the liquidator, must not purchase any part of the company’s assets during their tenure without the Tribunal’s leave. Any unauthorized purchases can be nullified by the Tribunal upon the liquidator’s, creditor’s, or contributory’s application. The Tribunal may also issue an order regarding the associated costs.

Prohibition on Profiting (Rule 40)

Members are prohibited from profiting from transactions related to the winding-up process or receiving payments for services rendered without the Tribunal’s order. Unauthorized payments or profits are subject to recovery during the liquidator’s accounts audit or otherwise.

Payment for Services

If a Tribunal orders payment to a committee member for special services related to the company’s asset administration, the order must specify the service nature. Generally, no remuneration is allowed for duties performed as a committee member without the Tribunal’s explicit order.

Committee Meetings

Meetings can be convened by the liquidator or by one-third of the committee members. A quorum requires either one-third of the total committee members or a minimum of two members, whichever is higher. Decisions are made by the majority of members present.

Resignation and Cost of Orders

A committee member may resign by submitting a written notice to the liquidator. Costs associated with obtaining Tribunal orders under rules 39 or 40 are borne by the interested party and not from the company’s assets.