The Finance Ministry will conduct the Goods and Services Tax (GST) Council Meeting in New Delhi today (June 22). Union Finance Minister Nirmala Sitharaman will presiding over the meeting. Although the meeting’s agenda is yet unknown, it is expected that the state ministers would table their requests.
Saturday’s Council meeting will be held after a gap of eight months. The 52nd GST Council meeting took place on October 7, 2023. In that meeting, the GST Council had decided to impose a 28 per cent levy on online gaming, casinos, and horse racing. Later in the March GST meeting, the council postponed the review of the 28 per cent levy imposed on the proceeds from online gaming.
Key expectations from June 22 meeting
1. Online gaming
As per sources, the government is likely to review the 28% GST on the full face value of bets by online gaming companies. Last year, in July and August, the Council approved amendments to the GST laws incorporating online gaming, casinos, and horse racing as taxable actionable claims. A commitment was made to reassess this implementation after six months, scheduled for April 2024, yet this review has not taken place. Presently, the online gaming sector is grappling with a tax liability of approximately Rs 2 trillion, a matter they have contested in court. The Supreme Court is expected to deliberate on their appeals in July.
Following the council decision, over 70 show cause notices have been issued to online gaming companies for alleged GST evasion of over Rs 1.12 lakh crore during financial years 2022-23 and 2023-24.
The online gaming industry is currently facing a tax liability of approximately Rs 2 lakh crore, which they have contested in court. It is anticipated that the Supreme Court will review their petitions in July.
Experts have pointed out that the GST Council has two possible courses of action: first, to abstain from making any adjustments while the issue is in litigation and await guidance from the court; second, to promptly rectify the contentious decision by eliminating the retroactive enforcement of the 28% GST.
“The GST Council meeting scheduled for 22.06.2024, has all eyes on it. The Council is expected to take up multiple issues like rate structure overhauling and rate rationalization on an overall basis, plug the concerns in respect of inverted duty structure (pharmaceuticals, textiles etc.), provide further clarifications on the newly introduced GST on corporate guarantee. A part of the wishlist is that the GST Council provides definitive guidance on multiplicity of proceedings by different tax authorities in the GST regime – this has become a bane for industry and is somewhat allayed by the Circular of 30.03.2024. The online gaming sector, which is reeling under severe impact of modification of the GST rate, anticipates the now delayed review of the sector will be taken up,” said Ranjeet Mahtani, Partner, Dhruva Advisors.
2.Chemicals and Fertilisers
The council may also discuss the recommendations made by the Standing Committee on Chemicals and Fertilisers in February to reduce GST on nutrients and raw materials in the interest of fertiliser manufacturing companies and farmers.
Currently, GST at a 5 per cent rate is charged on fertilisers, while raw materials like Sulphuric Acid and Ammonia face a higher GST at 18 per cent.
The issue of further reduce tax on fertilisers was placed before the GST council in its 45th and 47th meetings held in September 2021 and June 2022, though the council did not recommend any change in rates.
Currently, the GST regime has five broad tax slabs of zero, 5, 12, 18, and 28 per cent. A cess is levied over and above the highest 28 per cent rate on luxury and demerit goods.
3. Fuel under GST?
There have been many proposals to consider including fuel within the purview of GST in order to establish a consistent pricing structure for essential energy resources. However, certain states have previously expressed opposition to this proposition, citing concerns regarding the potential loss of substantial revenue generated from fuel taxes.
Anticipation persists that by integrating petrol into the ambit of GST, where the highest tax rate stands at 28 percent, notable price reductions could come to fruition. Currently, petroleum products are subjected to central excise duties and state-level value-added taxes (VAT). This system of dual taxation not only contributes to the inflation of diesel and petrol retail prices but also results in pricing disparities across different states.
“As hinted by the finance minister recently, spirited discussions regarding the inclusion of petrol, diesel, ATF, natural gas, and selected petroleum products within the ambit of GST have been taking place not just within the corridors of power but also within the industry. How far these requests will be met, however, will depend on the Centre taking on board the states,” said Shivam Mehta, Executive Partner, Lakshmikumaran & Sridharan Attorneys.