Category: GST News

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.

In a groundbreaking crackdown, the State Goods and Services Tax (SGST) department has uncovered a vast network of tax evasion amounting to several crores in prominent restaurants across the state. Over the course of a strategic operation, 250 officers from the Intelligence and Enforcement wings executed meticulous raids on 42 establishments, revealing a shocking turnover suppression of ₹60 crore. The initial day of this decisive action resulted in the recovery of ₹40 lakh in fines.

This comprehensive sweep spanned all districts, save for Pathanamthitta, and extended beyond the restaurant premises to the residences of owners and partners. These targeted operations were not haphazard but the culmination of six months of rigorous surveillance, where officers discreetly frequented the restaurants, blending in as regular patrons while scrutinizing food vloggers’ content for invaluable insights.

Sources within the GST department detailed the sophisticated tax evasion tactics employed by these establishments. From withholding bills to reclaiming them post-payment, and even manipulating accounting software, the methods were as varied as they were audacious. Some restaurants issued identical bill numbers daily, effectively duping customers, while others processed payments through the personal UPI accounts of employees, bypassing official channels entirely.

Dubbed Operation Phanum, inspired by the Gen Alpha slang “fanum tax”—the playful notion of food theft among friends—this initiative unveiled additional malpractices, such as unreported outside catering services, further complicating the web of deceit.

This operation follows the earlier Operation Palm Tree raids on scrap dealers in May, where tax evasions totaling ₹250 crore were uncovered, leading to arrests. The SGST department’s relentless pursuit of fiscal compliance highlights its commitment to dismantling tax evasion practices and restoring integrity to the industry.

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This assertive and expertly crafted narrative not only informs but also engages, presenting a vivid portrayal of the SGST’s extensive efforts to combat tax evasion in the restaurant sector.

In the bustling economic hub of Ahmedabad, the implementation of the Goods and Services Tax (GST) promised a simplified taxation system, designed to enhance business operations. However, data from the state commercial tax department reveals a staggering reality: approximately 405,000 businesses in Gujarat have shuttered since the GST rollout, highlighting significant challenges in the new tax regime.

This wave of closures, represented by the cancellation of GST Identification Numbers (GSTINs), reflects both the consolidation of businesses and outright shutdowns. Alarmingly, these closures in the past two years alone account for nearly 47% of all cancellations since the GST was introduced, marking a significant trend in Gujarat’s economic landscape. To put it into perspective, the cancelled GSTINs comprise 30% of the current 1.195 million taxpayers in the state.

Industry experts and officials from the State Goods and Services Tax (SGST) department attribute this upheaval to various factors, including strategic mergers, acquisitions, and unfortunate closures. Many entrepreneurs registered for GST with expansion ambitions; however, unanticipated challenges often resulted in penalties for non-compliance, prompting them to surrender their registrations. The past years have also seen a surge in business consolidations, particularly in sectors like engineering, plastics, and retail, where geopolitical tensions further strained operations.

Pathik Patwari, former president of the Gujarat Chamber of Commerce and Industry (GCCI), underscores the impact of rigorous enforcement against fraudulent billing practices, which forced many non-compliant entities to shut down. This, coupled with adverse economic conditions, has led to the closure of numerous enterprises across the state.

Moreover, data from the Union MSME ministry reveals that from July 2020 to December 2023, about 32,298 micro, small, and medium enterprises (MSMEs) nationwide relinquished their Udyam registrations, with Gujarat accounting for a notable share. This exodus signifies deeper structural challenges that need to be addressed to revitalize the state’s entrepreneurial spirit.

In essence, while the GST regime aimed to streamline taxation and foster business growth, its implementation has unveiled significant hurdles that have reshaped Gujarat’s commercial terrain. The state now stands at a crossroads, navigating the delicate balance between regulatory compliance and fostering a conducive environment for business resilience and growth.

In a landmark move during the 53rd GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, a series of pivotal decisions were taken, marking significant reforms in the taxation landscape of India. This council meeting underscored a clear intention from the Centre to streamline and optimize the Goods and Services Tax (GST) framework, with an emphasis on practical and broad-based reforms.

Key Decisions from the 53rd GST Council Meeting

Union Finance Minister Nirmala Sitharaman, presiding over the 53rd GST Council meeting in New Delhi, unveiled a raft of crucial recommendations that promise to impact various sectors significantly. One of the standout decisions is the imposition of a uniform 12% GST on all solar cookers, whether powered by a single or dual energy source. This move is a step towards encouraging sustainable energy solutions and promoting the use of renewable energy.

Additionally, the council has decided to exempt several services provided by Indian Railways from GST. This includes the sale of platform tickets, retiring rooms, waiting rooms, cloakroom services, and battery-operated car services. This exemption aims to alleviate the financial burden on the common person and enhance the overall experience of railway travel.

Hostel accommodations for students situated outside educational institutions have also been exempted from GST, provided the accommodation value does not exceed Rs 20,000 per person per month. This decision is expected to offer significant relief to students and working professionals, making living arrangements more affordable.

A uniform 12% GST rate has been recommended for all milk cans, regardless of their construction material. The standardized shape of milk cans will now determine their eligibility for this tax rate. This measure ensures consistency and removes ambiguity in the taxation of milk cans.

Similarly, a uniform GST rate of 12% will now apply to all carton boxes and cases made of both corrugated and non-corrugated paper or paperboard. This decision is particularly beneficial for apple growers in regions like Himachal Pradesh and Jammu & Kashmir, as it provides a streamlined tax structure for packaging materials.

All types of sprinklers, including fire water sprinklers, will attract a 12% GST rate. This inclusion under a uniform tax rate aims to simplify the tax structure for these essential safety and agricultural devices.

In an effort to combat fraudulent activities, biometric-based Aadhaar authentication will be rolled out nationwide. This measure is designed to curb fake invoicing and fraudulent input tax credit claims, ensuring greater transparency and accountability in the GST system.

To support small taxpayers, the council has extended the deadline for furnishing details and returns in the GSTR 4 form from April 30 to June 30. This extension provides much-needed relief and additional time for compliance.

The council has also recommended waiving interest and penalties for demand notices issued under Section 73 of the GST Act, in cases that do not involve fraud, suppression, or misstatements. This waiver is aimed at reducing the compliance burden and encouraging voluntary compliance.

To further reduce government litigation, the council has set monetary limits for filing appeals. Appeals by the department will only be filed if the amount involved is Rs 20 lakh or more for the GST appellate tribunal, Rs 1 crore for High Courts, and Rs 2 crore for the Supreme Court. This move is expected to significantly reduce the number of appeals and streamline the litigation process.

These comprehensive measures, proposed by the GST Council, reflect a concerted effort to simplify the GST regime, promote fairness, and support economic growth across various sectors. As these recommendations are implemented, they are poised to bring about a more efficient and equitable tax system in India.

The freshly concluded Lok Sabha elections have yielded a fascinating outcome. Contrary to the anticipated landslide of over 400 seats, the NDA, distinct from BJP, secured a simple majority against its rival alliances. The new BJP-led NDA Government, with Narendra Modi at the helm for a third consecutive term starting June 9, 2024, showcases a blend of continuity and change. While the BJP retains core portfolios, the new cabinet inclusively represents NDA allies, predominantly JDU and JDP. Eminent figures such as Rajnath Singh (Defence), Amit Shah (Home & Cooperation), Nitin Gadkari (Highways), Nirmala Sitharaman (Finance & Corporate Affairs), S. Jaishankar (External Affairs), Arjun Ram Meghwal (Law & Justice), and Piyush Goyal (Commerce & Industry) continue to drive the nation forward.

India’s stock market, after an initial turbulence during exit polls and counting day, has rebounded with renewed vigor. The retention of key portfolios by seasoned ministers fosters a sense of stability and continuity in policy and reform agendas. The Ministry of Finance, under Nirmala Sitharaman, remains focused on job creation, infrastructure development, private investment acceleration, and comprehensive economic and tax reforms. Ensuring robust GDP growth and maintaining India’s status as one of the fastest-growing economies are paramount. However, challenges such as policy uncertainties, geopolitical tensions, rural demand sluggishness, climate change, and inflation pose significant risks to sustained growth.

The forthcoming Union Budget for 2024-25, to be presented by the Finance Minister, is poised to address these objectives and delineate the government’s focus for the current and upcoming years. Crucial areas include GST reforms, tax policy rationalization, and fiscal discipline. The GST Council’s reconstitution and convening will be critical to these efforts.

Economic Indicators: GST Revenue and Market Dynamics

In May 2024, India’s GST revenue reached an impressive Rs. 1.73 lakh crore, marking a 10% year-on-year growth. This surge is attributed to a robust increase in domestic transactions (up 15.3%) and a decline in imports (down 4.3%). After adjusting for refunds, the net GST revenue stood at Rs. 1.44 lakh crore, reflecting a 6.9% increase from the previous year.

The GST Network (GSTN) has introduced a pivotal functionality allowing taxpayers to opt for a personal hearing in GST DRC-01 responses, an enhancement following a significant Madras High Court ruling (GABRIEL INDIA LIMITED v. STATE TAX OFFICER, 2023). This option provides greater taxpayer engagement and clarity in the GST dispute resolution process.

Compliance and Reporting: Special Procedures for Specific Sectors

A recent notification mandates new procedures for taxpayers dealing in Pan Masala, Tobacco, and related products. Effective April 1, 2024, taxpayers must comply with Notification No. 04/2024-CT, which introduces forms GST SRM-I and GST SRM-II for machine registration and monthly reporting of inputs and outputs. This procedural update, available on the GSTN portal, aims to enhance transparency and compliance in these sectors.

Fiscal Performance: Detailed Breakdown of GST Collections

In fiscal year 2024-25, up to May 2024, cumulative gross GST revenue amounted to Rs. 3.83 lakh crore, exhibiting an 11.3% year-on-year growth. The detailed revenue collection for May 2024 is as follows:

• Central Goods and Services Tax (CGST): Rs. 32,409 crore
• State Goods and Services Tax (SGST): Rs. 40,265 crore
• Integrated Goods and Services Tax (IGST): Rs. 87,781 crore (including Rs. 39,879 crore from imported goods)
• Cess: Rs. 12,284 crore (including Rs. 1,076 crore from imported goods)

Notably, states such as Delhi, Punjab, Uttarakhand, and Haryana have shown remarkable growth in GST collections, while regions like Himachal Pradesh, Mizoram, Assam, West Bengal, Madhya Pradesh, and Tamil Nadu lag behind. Negative growth has been observed in Chandigarh, Arunachal Pradesh, Nagaland, Meghalaya, Lakshadweep, and Ladakh.

This comprehensive overview underscores the intricate dynamics and strategic directions of India’s political and economic landscape, highlighting the need for sustained policy efforts to address both opportunities and challenges.

The panel responsible for evaluating tax adjustments within the Goods and Services Tax (GST) Council has, in preparation for the upcoming October 7th meeting, voiced its disapproval of the industry’s plea to reduce taxes on tobacco products. Specifically, the industry had requested a standardized additional compensation cess on cigarettes, a compensation cess on bidis, an additional compensation cess on smokeless tobacco products, and potentially lower compensation cess rates on cigarette sticks measuring up to 70 mm.

However, the Council’s Fitment committee has recommended maintaining the existing tax structure, effectively rejecting the industry’s proposals. In the realm of tobacco and its associated products, the decision regarding Compensation Cess rates was made in alignment with the weighted average Value Added Tax (VAT) rate of 28.7%. Consequently, the GST rate for cigarettes remains at 28%. Bidis, on the other hand, are subject to a GST rate of 28%, but no Compensation Cess is imposed upon them.

It is worth noting that in the Union Budget for the fiscal year 2024, the National Calamity Contingent Duty (NCCD) rate for specified cigarettes experienced an approximate 16% increase, effective as of February 2, 2023. This adjustment in the NCCD rate has implications for the taxation of certain cigarette products.

In the serene ambiance of New Delhi, Finance Minister Nirmala Sitharaman expounded on the profound impact of the Goods and Services Tax (GST) on the North Eastern states during her address at the distinguished ‘Conclave 2023.’ The states of the Northeast have experienced a substantial surge in their revenue collections since the inception of this tax reform in 2017, a testament to its efficacy.

Sitharaman elucidated that the region’s prosperity stems from the government’s unwavering commitment to bolstering infrastructure and enhancing connectivity. Moreover, these states have reaped the rewards of augmented tax transfers and the allocation of funds for vital asset creation.

It is noteworthy that the improvements in tax collection have not been confined solely to regions with bustling manufacturing hubs. Sitharaman underscored that even states with more modest manufacturing activities have witnessed impressive growth in GST revenue. She clarified that this phenomenon does not diminish the contributions of manufacturing states, as they, too, benefit from taxes levied on goods produced and consumed within their boundaries, as well as those imported from other states for local consumption.

The essence of the GST lies in its status as a destination-based tax on consumption. This pivotal shift from the pre-GST era has bestowed a considerable advantage upon states with limited manufacturing capacities. Such states now enjoy the proceeds of Integrated GST (IGST) on imports, further fortifying their fiscal position.

Sitharaman offered a resounding affirmation that the Northeastern states stand as the paramount beneficiaries of the GST regime. She pointed out that these states have exhibited a remarkable compound annual GST revenue growth rate of 27.5% since the GST’s inception, a stark contrast to the pre-GST annual growth rate of 14.8%. This bolstered revenue stream equips the states with the means to implement crucial programs for their development.

Furthermore, Sitharaman revealed that the quantum of tax devolution to this region has quadrupled between 2014 and 2023, now standing at a substantial ₹5.06 trillion. To catalyze capital asset creation, the Northeastern states have also been granted ₹15,440 crore in interest-free, 50-year loans since the fiscal year 2020-21.

In closing, these developments underscore the transformative impact of GST on the Northeastern states, both in terms of revenue growth and the facilitation of essential infrastructure projects. As the economic landscape continues to evolve, the Northeast remains a shining exemplar of the positive outcomes achievable through strategic tax reforms.

A significant incident of Goods and Services Tax (GST) fraud has been uncovered in the Palghar district of Maharashtra, resulting in the arrest of an individual responsible for embezzling a substantial sum of Rs 18.66 crore from the government’s coffers. Dhiren Chandrakant Shah, the proprietor of a private enterprise known as Archana Impex, stands accused of orchestrating this fraudulent scheme by allegedly generating counterfeit GST invoices totaling Rs 18.66 crore.

In this elaborate scheme, Mr. Shah unlawfully claimed an input tax credit (ITC) amounting to Rs 8.80 crore for ineligible expenses and further availed ITC worth Rs. 9.86 crore without any legitimate supply of goods or services.

The arrest of Dhiren Chandrakant Shah took place on Friday and was conducted under the provisions of Section 69 of the CGST Act, 2017, citing a breach of Section 132.

This fraudulent invoice operation was successfully uncovered and dismantled by the dedicated officers of the CGST Palghar Commissionerate, Mumbai.

During the investigation, Mr. Shah divulged that he had initiated the operations of Archana Impex and M/s. Archana Enterprises under the directives of an individual named Pravin Devichand Rajawat.