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In the labyrinthine world of India’s taxation, the Goods and Services Tax (GST), introduced seven years ago with much fanfare, continues to grapple with complexities far removed from its envisioned simplicity. Arvind Subramanian, the former Chief Economic Advisor, has cast a critical eye on the tax regime, asserting that the promise of a ‘Good and Simple Tax’ remains an unfulfilled aspiration.

Revenues generated under the GST have, disappointingly, only now matched the levels seen before its implementation, Subramanian lamented on Thursday. This sluggish revenue performance, he attributed to a “rate-cutting spree” initiated by the GST Council from late 2017 through 2019, a period during which both the Centre and States were culpable.

Subramanian highlighted a significant oversight: the absence of critical data on refunds. “Our focus was misguided, fixated on collections because refunds were not published. This led us to an erroneous conclusion about the health of GST revenues. Had refunds data been transparent, the approach to rate cuts would have been far more prudent,” he explained.

Earlier this year, the government resumed the practice of releasing net GST collection figures, only to halt it once more. Without access to refund data, there is a misleading perception that GST revenues are robust,” Subramanian observed during a seminar on GST’s seventh anniversary, organized by the Centre for Social and Economic Progress.

Subramanian did not mince words when addressing the GST’s convoluted structure, referring to the multiple cess rates and the overall rate framework as ‘monstrous. He proposed a radical simplification: a single cess rate, one standard rate, and one lower rate. This, he argued, would bring much-needed clarity and efficiency to the system.

Frequent amendments and adjustments every time the GST Council convenes, Subramanian contended, have further complicated the tax regime, moving it away from the simplicity and rationalisation initially intended. Reflecting on his 2015 recommendations, he noted he had proposed a tri-rate structure: one for essential goods, a standard 18% rate, and a 40% rate for demerit goods.

Interestingly, Subramanian’s stance on including sectors such as electricity, petroleum, and alcohol within the GST ambit has evolved. Once a proponent, he now sees such inclusion as politically unfeasible and ill-advised, especially given the strained relations between the Centre and the States. Expecting States to relinquish more sovereignty under current conditions is unrealistic,” he conceded, acknowledging the significant concessions already made by States for GST’s original rollout.

Subramanian’s incisive critique underscores a fundamental reality: the GST, envisioned as a streamlined and efficient tax system, remains ensnared in a web of complexities and political dynamics, far from the straightforward solution it was intended to be.

The National Litigation Policy of India mandates a strategic approach to legal appeals, stipulating that appeals should not be pursued when the monetary amount involved is below a specified threshold set by Revenue Authorities. It also discourages appeals in cases where precedents from Tribunals and High Courts have settled the matter without further contestation in the Supreme Court.

In a significant move, the GST Council, during its 53rd meeting held in New Delhi on June 22, 2024, introduced several measures aimed at simplifying compliance procedures for taxpayers. These recommendations included steps to facilitate trade and reduce the burden of litigation.

A pivotal recommendation by the Council involves setting monetary thresholds for filing appeals in GST cases by the department before the GST Appellate Tribunal, High Courts, and the Supreme Court. The monetary limits recommended are as follows:

GST Appellate Tribunal (GSTAT): Rs. 20 lakhs
High Court: Rs. 1 crore
Supreme Court: Rs. 2 crores

Following these recommendations, the Central Board of Indirect Taxes and Customs (CBIC) issued Circular No. 207/1/2024-GST on June 26, 2024, providing clarifications on reducing government litigation by fixing monetary limits for filing appeals or applications by the Department before GSTAT, High Courts, and the Supreme Court.

Non-Filing of Appeals Under Section 120

Section 120 of the CGST Act 2017 empowers the CBIC to issue orders, instructions, or directions fixing monetary limits to regulate the filing of appeals or applications by Central Tax Officers. When an Officer refrains from filing an appeal or application due to such directions, it does not prevent them from filing in other cases involving similar issues or questions of law. Importantly, the non-filing in one case cannot be interpreted as consent to the decision on the disputed issue.

Key Points from CBIC Circular No. 207/2024

The CBIC has exercised its powers under Section 120 of the CGST Act to establish the following monetary limits below which appeals or applications shall not be filed by Central Tax Officers:

Appellate Forum and Monetary Limit

GST Appellate Tribunal (GSTAT): Rs. 20 lakhs
High Court: Rs. 1 crore
Supreme Court: Rs. 2 crores

These thresholds apply to appeals or applications, including Special Leave Petitions (SLPs), under any provision of the CGST Act.

Principles for Non-Filing of Appeals

The following principles are to be observed to determine if a case falls within the monetary limits for non-filing of appeals:

• Only the aggregate amount of tax in dispute is considered (excluding interest and penalties).
• The monetary limit covers all types of GST (CGST, SGST, UGST, IGST) and Compensation Cess.
• Disputes solely involving interest, penalty, or late fees are assessed based on the amount of interest, penalty, or late fee.
• In cases of erroneous refunds, the disputed refund amount is considered.
• The monetary limit applies to the disputed amount only, excluding any admitted amounts.
• For composite orders disposing of multiple appeals or notices, the monetary limit applies to the total amount involved.

Exceptional Situations

Threshold limits do not apply in certain exceptional circumstances where decisions are based on merits rather than monetary limits. These include cases where:

• A provision is deemed ultra vires to the Constitution of India.
• A rule or regulation is deemed ultra vires to the parent Act.
• An order, notification, instruction, or circular is deemed ultra vires to the Act or Rules.
• Matters related to the valuation of goods or services, classification, refunds, place of supply, or other issues that are recurring, involve interpretation, or where adverse comments or costs have been imposed against the government.

Deciding to File Appeals

Even when the amount involved exceeds the prescribed monetary limit, appeals are to be decided on merits. The objective is to reduce unnecessary litigation and provide certainty to taxpayers regarding tax assessments.

Precedent Value

Judgments against which appeals are not filed due to monetary limits will not hold precedent value. The reviewing authority must record that although the decision is not acceptable, no appeal is filed because the amount involved is below the monetary limit set by the Board. This non-filing does not result in ‘attaining finality’ on an issue and does not prevent filing appeals in other cases with similar issues exceeding the monetary limit. Appeals may also be filed in cases involving questions of law.

Conclusion

The recent CBIC clarification offers comprehensive guidance on applying monetary limits in GST appeals. However, the scope for applying these limits is limited by numerous exceptions, including issues of valuation, classification, place of supply, refunds, recurring issues, interpretation issues, and validity of provisions. Notably, these areas have been major sources of disputes in the GST regime. The emphasis remains on reducing unnecessary litigation while ensuring justice and revenue interests are upheld.

In a dramatic turn of events, the State Goods and Services Tax (SGST) and Subsidiary Intelligence Bureau (SIB) teams orchestrated a high-stakes raid on Tuesday targeting a prominent builder and developer in Kanpur’s Civil Lines and Barra areas, following allegations of extensive tax evasion.

According to SGST insiders, substantial evidence pointing to large-scale tax evasion was unearthed during the operation. The intensive investigation, stretching late into the night, culminated in the builder conceding and promptly depositing a sum of Rs 1.03 crore.

In a robust display of regulatory enforcement, multiple documents were seized under the directive of Joint Commissioner SIB Shivika Singh. The coordinated raid was executed by Deputy Commissioners SIB Sushma Singh, Vivek Upadhyay, Ramendra Ratnakar, Vijay Singh, and Kaushalendra Singh, who meticulously combed through the builder’s establishments.

Joint Commissioner Shivika Singh elaborated on the findings, stating, “Our scrutiny revealed significant discrepancies in tax declarations. The builder was found accepting advance payments during pre-bookings but had been consistently underreporting tax liabilities over the previous years.” Singh further highlighted the irregularities in tax rates, underscoring the deliberate manipulation detected during the probe.

This operation underscores the SGST’s relentless pursuit of tax compliance, reflecting broader efforts to uphold fiscal integrity and deter fraudulent practices. The implications of this raid echo beyond Kanpur, resonating as a stern warning to entities attempting to circumvent tax laws.

In a fervent appeal to the Union Finance Minister, the Central Arecanut and Cocoa Marketing and Processing Cooperative (Campco) has underscored the urgent need to reduce the Goods and Services Tax (GST) on arecanut and its associated agricultural inputs.

Appeal for Tax Reduction

Aiming to alleviate the financial burden on farmers, Campco President A Kishore Kumar Kodgi penned a detailed letter to Finance Minister Nirmala Sitharaman, urging a reduction in GST on arecanut from 5% to 2%. Kodgi emphasized that such a reduction would not only incentivize farmers to transact through cooperatives but also significantly curtail tax evasion prevalent in informal trading networks. This strategic move, he argued, would endow cooperatives with a competitive edge, thereby bolstering their sustainability in the market.

Kodgi also highlighted the critical need to reduce the GST on copper sulphate from 18% to 5%. Copper sulphate, an essential fungicide used in the cultivation of arecanut, coffee, and rubber, stands as a cornerstone in modern agricultural practices. Aligning its GST rate with that of other fertilizers would provide substantial financial relief to smallholding farmers, fostering a more equitable agricultural environment.

Curbing Illegal Imports and Protecting Farmers

In addition to tax revisions, Kodgi urged the government to lower the Customs Duty on advanced agricultural tools, particularly carbon fibre poles, which are indispensable for tasks such as fungicide spraying and crop harvesting. Currently subjected to a prohibitive 48% Customs Duty, reducing this rate would render these tools more accessible to farmers, thereby enhancing agricultural efficiency.

Furthermore, Campco’s letter vehemently called for stringent measures to curb illegal imports of arecanut and pepper. Kodgi proposed the incineration of such illicitly imported quantities to mitigate health risks and maintain market integrity. He asserted that illegal imports jeopardize both public health and the livelihoods of local farmers, necessitating immediate and decisive action.

Research and Development Initiatives

Highlighting the necessity of ongoing research, Campco also appealed for government funding to explore the medicinal benefits of arecanut and to develop solutions for combating yellow leaf disease, which plagues arecanut plantations. These research initiatives, Kodgi noted, are vital for advancing agricultural knowledge and ensuring the long-term viability of arecanut cultivation.

By addressing these multifaceted issues, Campco aims to foster a more robust, sustainable agricultural sector that safeguards the interests of farmers while promoting public health and market stability.

The gross goods and services tax (GST) collections for June 2024 have risen to Rs 1.74 trillion, representing a year-on-year (Y-o-Y) increase of 7.7 percent, according to sources disclosed to Business Standard. This marks a deceleration in growth compared to the 12.4 percent and 10 percent increases observed in April and May, respectively, with month-on-month figures remaining largely unchanged.

May’s gross GST collections stood at Rs 1.73 trillion, while April witnessed a record high of Rs 2.1 trillion. The revenue accumulated by June has brought the fiscal year-to-date total to Rs 5.57 trillion. Despite the tempered growth, an official remains optimistic, predicting that the upward trend will persist in the coming months with gross collections expected to stay above the Rs 1.6 trillion threshold.

Specific figures for Central and State GST collections were not provided; however, it is known that approximately Rs 39,600 crore was allocated to the central GST account from the Integrated GST (IGST) collection, and states received Rs 33,548 crore from the IGST collection. This data coincides with the seventh anniversary of the GST rollout in India, with the finance ministry deciding to cease the publication of detailed tax collection figures.

“The stabilisation of the GST regime likely underpins the decision to withhold detailed figures,” commented the source.

Pratik Jain, a partner at PwC India, remarked, “Although June’s collection growth appears subdued compared to previous months, the overall GST collection trend has been encouraging.” He suggested that this positive trend might prompt the GST Council to revisit the rate rationalisation initiative, as discussed in their latest meeting.

Another expert highlighted that the figures reflect a resilient economy, bolstered by businesses’ commendable self-compliance. “Effective audits, scrutiny measures, and enforcement by the department have significantly contributed to this success,” observed Saurabh Agarwal, tax partner at EY.

Marking the seventh anniversary of the GST regime, which consolidated 17 local taxes, the finance ministry issued statements lauding the system through social media. The theme of the 7th GST Day, “Sashakt Vyapar Samagra Vikas” (empowered trade, overall growth), was prominently featured. The ministry highlighted the benefits of reduced tax rates on household goods, proclaiming that “#7yearsofGST has brought happiness and relief to every home with lower GST on household appliances and mobile phones.

The GST taxpayer base expanded to 14.6 million in April 2024, up from 10.5 million in April 2018. The ministry also underscored the reduction in compliance burdens for small taxpayers, with the GST Council recommending the waiver of annual return filing for those with an aggregate annual turnover of up to Rs 2 crore in 2023-24.

The Quarterly Returns with Monthly Payment (QRMP) scheme has cut the number of annual returns filed from 24 to 8 for more than 4.4 million small taxpayers. Additionally, the Invoice Furnishing Facility (IFF) has ensured the seamless transfer of input tax credit, further easing the compliance process.

The All Kerala Gold & Silver Merchants Association has made a compelling plea to the Union Finance Ministry for a reduction in the basic customs duty on gold. The recent escalation of the import duty from 7.5% to 15% has markedly driven up production costs, creating a substantial economic burden on domestic manufacturers and exporters.

B. Govindan, the association’s president, highlighted the severity of the situation, pointing out that the increased duty has led to additional taxation surpassing ₹9 lakhs per kilogram. This dramatic surge threatens the viability of the gold trade, an industry critical to the state’s economy.

In a detailed pre-budget memorandum submitted to Finance Minister Nirmala Sitharaman, the association proposed several key measures to invigorate the sector. They advocated for reducing the GST on gems and jewelry to 1.25%, a move that would not only make these items more affordable for consumers but also stimulate market demand significantly.

Another crucial recommendation was to raise the PAN card limit for mandatory quoting from ₹2 lakhs to ₹5 lakhs. This adjustment would streamline transactions, ease the compliance burden on merchants, and promote greater transparency. Furthermore, increasing the cash purchase limit under Section 40A of the Income Tax Act from ₹10,000 to ₹1 lakh for claiming capital gains tax relief would incentivize legal cash transactions and enhance market liquidity.

The association also emphasized the need for innovative financial solutions, such as introducing EMI options for purchasing 22-karat gold jewelry. This would promote digital transactions and ensure that buyers have flexible payment methods while maintaining necessary restrictions on bullion and coins.

Revamping the Gold Monetization Scheme (GMS) was another priority. The association called for exemptions for ancestral gold from taxation under the GMS, encouraging households to deposit up to 500 grams of such gold without tax implications. This initiative would likely increase participation rates and integrate more gold into the formal economy.

To further streamline the industry, the association suggested minimizing the physical movement of gold and enhancing banking participation to improve accessibility. Partnering with religious institutions to raise awareness about the GMS and lowering the minimum deposit requirement were also recommended to attract a broader range of participants.

These strategic proposals aim to fortify the domestic gold industry, ensuring its resilience and capacity to contribute to the national economy amidst fluctuating global markets.

In a compelling plea to the Union Finance Ministry, the All Kerala Gold & Silver Merchants Association has underscored the urgent need to revise the basic customs duty on gold to invigorate domestic production and stimulate exports. This call to action follows a substantial hike in import duty from 7.5% to 15%, a move that has markedly escalated production costs and imposed an additional tax burden exceeding ₹9 lakhs per kilogram, as highlighted by B. Govindan, the Association’s president.

The association’s meticulously crafted pre-budget memorandum, addressed to Finance Minister Nirmala Sitharaman, advocates for a reduction in the GST rate on gems and jewelry to 1.25%. Such a measure, they argue, would enhance consumer accessibility and drive demand, vitalizing the industry. Furthermore, the memorandum proposes raising the PAN card limit for mandatory quoting from ₹2 lakhs to ₹5 lakhs, a change that would streamline transactions and alleviate compliance burdens.

In a bid to incentivize transparency and reduce reliance on cash transactions, the Association also recommends increasing the cash purchase limit under Section 40A of the Income Tax Act from ₹10,000 to ₹1 lakh for claiming capital gains tax relief. This change would foster a more open and accountable market environment.

A visionary approach to modernizing the gold trade also includes introducing EMI options for purchasing 22-karat gold jewelry, thereby promoting digital transactions while maintaining stringent controls over bullion and coins. The association has also emphasized the need to revamp the Gold Monetization Scheme (GMS). They propose exempting ancestral gold from taxation under the GMS and consider tax exemptions for households depositing up to 500 grams of ancestral gold to boost participation rates.

To streamline the gold trading process further, the Association calls for minimizing the physical movement of gold, encouraging broader participation from banks, and partnering with religious institutions to raise awareness about the GMS. Reducing the minimum deposit requirement is also seen as a critical step towards attracting a more diverse range of participants.

This multifaceted appeal not only aims to bolster the domestic gold industry but also to align it with modern economic practices, ensuring its sustained growth and contribution to the national economy.

In a landmark decision poised to benefit major technology giants like Google, Microsoft, Oracle, and Walmart, along with a myriad of other multinational corporations (MNCs), the Indian government has announced that Employee Stock Option Plans (ESOPs), Employee Stock Purchase Plans (ESPPs), and Restricted Stock Units (RSUs) offered by foreign firms to their employees in India will be exempt from Goods and Services Tax (GST). This development, subject to specific conditions, marks a significant relief for numerous MNCs and start-ups entangled in tax disputes over these employee benefits.

The Central Board of Indirect Taxes & Customs (CBIC), following recommendations from the GST Council, has issued a comprehensive circular clarifying this stance. The circular unequivocally states that no service supply is perceived between the foreign parent company and its Indian subsidiary when the parent issues ESOPs, ESPPs, or RSUs to the subsidiary’s employees, provided the cost is reimbursed on a cost-to-cost basis.

However, the CBIC has stipulated that if any additional charge is levied over and above the cost of the securities or shares, GST will be applicable on that excess amount. In such cases, the domestic subsidiary will be liable to pay GST on a reverse charge basis for the imported service.

This circular elucidates the multifaceted process of transferring ESOPs, ESPPs, and RSUs, emphasizing that these transactions involve several steps. The domestic subsidiary offers these stock options as part of the employees’ compensation package, aligning with employment terms. Employees may then exercise these options by purchasing shares at the grant price or holding onto them until they vest.

This clarity aims to resolve longstanding disputes between the tax authorities and Indian subsidiaries of MNCs. Experts like Ankit Joshi, Associate Partner at N.A. Shah Associates, and Brijesh Kothary, Partner at Khaitan & Co, believe this directive will significantly impact by offering a clear framework and relieving companies from potential tax liabilities on these transactions.

Joshi notes that the tax authorities at both central and state levels had previously issued GST demands on the cost reimbursements under the reverse charge mechanism (RCM). The new circular, however, sets a precedent that could end these disputes, providing much-needed relief and clarity.

Kothary adds that this guideline applies not only to arrangements between foreign and Indian subsidiaries but may also extend to domestic parent-subsidiary relationships. Companies that have faced tax demands or have already paid taxes during investigations might consider seeking redress based on this circular.