Goods and Services Tax (GST) Council on Saturday decided to set up appellate tribunals to resolve GST disputes, tighten the tax regime of pan masala, gutka and chewing tobacco to check tax evasion and reduce the late fee on annual return filings to small businesses, finance minister Nirmala Sitharaman, who chairs the Council, told reporters after the 49th meeting of the federal indirect tax body.
Goods and Services Tax (GST) Council on Saturday decided to set up appellate tribunals to resolve GST disputes, tighten the tax regime of pan masala, gutka and chewing tobacco to check tax evasion and reduce the late fee on annual return filings to small businesses, finance minister Nirmala Sitharaman, who chairs the Council, told reporters after the 49th meeting of the federal indirect tax body.
Sitharaman also told reporters in the capital that the Central government will release ₹33,506 crore to states by way of pending GST compensation. This includes the entire pending provisional compensation to states and also the final compensation to those states which have given final figures certified by their Accountant Generals, the minister said.
The provisional dues pertain to the month of last June. "Although the amount is not available in the compensation fund as of today, we have decided to release from our own resources and this amount will be recouped from future cess collections," Sitharaman said referring to the Rs. 16,982 crore of provisionally admissible claims.
The Council decided to lower the tax rate for liquid jaggery or rab from 18% to 5% if packaged and labelled and to zero if sold otherwise. The tax rate on pencil sharpener has been reduced from 12% to 18%.
The Council approved the recommendation of a ministerial panel to tighten the tax regime of pan masala, gutka and chewing tobacco by changing the compensation cess levied on these items from ad valorem basis ( a percentage of the price) to a tax to be specified in rupee terms. The ministerial panel did nto recommend capacity based taxation for these sectors. However, it recommended compliance and tracking measures to be taken to plug revenue leakage and tax evasion.
The Council adopted the report of a ministerial group on setting up GST appellate tribunals with certain modifications. There will be further discussions over the next few days with states and the final amendments to GST laws will be ready by early March for incorporation in the Finance Bill 2023 pending before the Parliament, Sitharaman explained.
The Council also decided to extend the tax exemption available to educational institutions and Central and state educational boards for conduct of entrance examination to any authority, board or a body set up by the Central government or state government including National Testing Agency for conduct of entrance examination for admission to educational institutions.
The Council also decided to lower the late fee for filing annual returns by small businesses with upto ₹20 crore annual turnover.
The Council did not consider a report by another ministerial group on online gaming, casinos and horse racing led by Meghalaya chief minister Congrad Sangma at Saturday's meeting as its chairperson was not present. The committee had given its report to the Council but had not reached a consensus on the base on which the tax should apply.
In response to a question on the options before the Council, Revenue Secretary Sanjay Malhotra explained that till the time any modification or change is made to the legal framework, the law of the land will be followed. Whatever are the provisions, we will continue to apply them, Malhotra said.
Experts said that by the time, the conclusion will happen on the valuation of gaming services, there is a risk of under recovery and under payment of taxes.
"These indirect taxes will be difficult to be recovered from the customers as the identity of the customers is unknown and hence early decision could help the industry to reduce the burden", said Abhishek A Rastogi, founder at Rastogi Chambers. "It is hoped that clarification is provided to at least those sort of gaming services for which there is no dispute or ambiguity so that liability in such cases does not occur in future", said Rastogi.
"It is hoped that appropriate instructions are provided now to the concerned field officers that no coercive recoveries at this stage maybe taken," added Rastogi.
Abhishek Jain, tax partner at KPMG said the proposed creation of GST Tribunal is a positive development and industry players would hope that their long wait for GST Tribunal will soon be over.