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.