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Input Tax Credit Relief Sought by Food Services Sector in Upcoming Budget

editor — Wed, 17 Jul 2024 04:29:31 +0000

The National Restaurant Association of India (NRAI) has highlighted the issue of the absence of input tax credit (ITC) for the restaurant industry to the Union finance ministry. Currently, restaurant services attract a 5% GST without ITC. The industry is advocating for an optional structure allowing for the collection of ITC at a higher rate of 12%, alongside the existing structure.

“We don’t get GST input tax credit. We have written to the finance ministry. There is a budget coming up. For the next six months, we are meeting all the finance ministers across states and we are also meeting the finance minister of Bengal very soon. I am hopeful that the GST Rate Rationalisation Committee will look into this,” an industry expert stated.

“Without GST input tax credit, we are experiencing double taxation. For instance, when paying rent, we are charged 18% GST and then collect 5% GST from consumers, which we pay to the government,” the expert explained.

Restaurant operators emphasize this issue as main street rentals have increased across major cities, including Calcutta. The restaurant industry, valued at ₹5.69 lakh crore, contributes 1.9% to India’s GDP. The NRAI estimates this will grow to ₹7.76 lakh crore by 2028. The industry’s tax contribution was ₹33,809 crore in 2024, projected to reach ₹55,594 crore by 2028.

State Excise Concerns

NRAI members are set to meet Bengal excise officials to discuss various issues, including allowing restaurants and standalone outlets to serve liquor on dry days, high label registration fees, and increased duties on craft and draught beer.

“We are hopeful of a meeting with the excise department officials in August,” another industry expert mentioned.

“For this industry to thrive, it must include both food and beverage,” he added. Currently, liquor label registration fees vary nationally from ₹1,500 to ₹15,000, while in Calcutta, it stands at ₹50,000 per label per year. The association is seeking a reduction. Additionally, the duty on draught beer has surged from ₹12 to ₹200 over the past two years, prompting the association to request a review. While 5-star hotels are exempt from dry day rules, the association is calling for parity, allowing standalone bars to serve liquor on dry days.

The association also urges that all listed brands be available at Bevco warehouses to prevent stock shortages at the retail level.

Source: The Telegraph India

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GST Taxpayers Demand Rate Rationalisation and Amnesty Scheme

editor — Sat, 22 Jun 2024 05:04:07 +0000

As GST marks its seventh anniversary, taxpayers are calling for the rationalisation of rates, faceless dealings with authorities, and an amnesty scheme, according to a survey by a leading consulting firm.

The top demand for GST 2.0 is “rationalising GST rates across sectors, focusing on removing the inverted duty structure,” the survey revealed. The GST Council is set to meet on Saturday to address several issues.

Rate rationalisation, including reducing the number of slabs, has been a long-standing agenda. However, both the Centre and states have delayed the decision due to the potential need to increase rates on some goods and services. The merging of the 12% and 18% slabs to around 16-17% is a possibility, but higher rates on several products could be politically sensitive. Correcting the inverted duty structure, where finished products attract lower levies than their inputs, is seen as an easier issue to address.

The survey, which included 760 respondents from small and large businesses, highlighted the problems tax audits pose across segments, with multiple actions by state and central authorities. It also stressed the need to remove restrictions on the use of input tax credits, which were imposed due to fraud. Additionally, some businesses requested measures to reduce the working capital locked up under the current system.

Taxpayers also called for an amnesty scheme to resolve disputes that have arisen over the past seven years, many of which are technical in nature.

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NDA 3.0 Coalition Government: Impact on GST Reforms

editor — Mon, 17 Jun 2024 04:32:34 +0000

Introduction

With the formation of the new NDA 3.0 government, led by a coalition of the BJP, Telugu Desam Party (TDP), and Janata Dal (United), there are many questions about how this will impact ongoing Goods and Services Tax (GST) reforms. Despite concerns, legal experts believe that the coalition government is unlikely to disrupt the broad direction of GST reforms. However, certain issues, such as the powers of tax officers, may come under renewed scrutiny.

Understanding GST Reforms

The Goods and Services Tax (GST), introduced in India in 2017, aimed to simplify the complex web of indirect taxes by creating a single tax system. GST reforms have focused on streamlining tax rates, improving compliance, and reducing the burden on businesses. The reforms are crucial for fostering a business-friendly environment and promoting economic growth.

Impact of Coalition Government on GST Reforms

Historically, GST reforms have enjoyed support across party lines, and experts believe this trend will continue under the new coalition government. The broad agenda of GST reforms is expected to remain on track, even as the coalition dynamics may influence specific priorities and timelines.

GST Council’s Role and Upcoming Meeting

The GST Council, comprising representatives from both the central and state governments, plays a pivotal role in shaping GST policies. The upcoming meeting on June 22 is significant as it will be the first since the coalition government took office. Key issues, including rate rationalisation and the powers of tax officers, are expected to be discussed.

Key Issues on the Table

Several important topics are on the agenda for the GST Council’s upcoming meeting. Among these are the rate rationalisation of GST and the checks and balances on the powers of tax officers. While rate rationalisation may be postponed, the focus is likely to shift towards reviewing the authority granted to tax officials.

Rate Rationalisation: On the Back Burner?

Rate rationalisation involves adjusting GST rates to make them more uniform and reduce classification disputes. However, due to the coalition government’s need to maintain harmony among its partners, potentially inflationary reforms like rate rationalisation may be deferred. This postponement reflects the delicate balance required to keep coalition partners satisfied.

Power of Tax Officers: A Focused Review

The powers of GST officials, particularly under Sections 69 and 70, have been contentious. Section 69 gives tax officers the power to arrest, while Section 70 allows them to summon individuals and demand documents. These powers are currently under review by the Supreme Court. Experts believe that the new government may push for greater checks and balances on these powers to prevent misuse and ensure fairness.

Enhancing Compliance and Ease of Doing Business

The coalition government is expected to prioritize enhancing compliance and making it easier for businesses to operate. Recent amendments to the Central GST Act have aimed to reduce scrutiny from tax officers and automate compliance processes. For instance, the GST Network’s new functionality to generate automated intimations helps taxpayers reconcile their input tax credit differences, minimizing human intervention.

Online Gaming and GST

The online gaming industry has been significantly impacted by GST. In October 2023, the GST Council imposed a 28 percent tax on the full face value of bets placed on online gaming platforms. This high tax rate has been a point of contention, with industry stakeholders arguing that it should be calculated on the gross gaming revenue instead.

Retrospective Taxation on Online Gaming

One of the most controversial aspects has been the retrospective application of the 28 percent GST on online gaming, dating back to August 2017. This move has led to massive tax demands and numerous legal challenges. Many gaming companies have received showcause notices for alleged GST evasion, amounting to significant sums.

Coalition Government’s Stance on Online Gaming

There is cautious optimism that the coalition government may reconsider the stringent GST policies on online gaming. Given the industry’s potential for growth and its contribution to the digital economy, reducing the tax burden could foster development and innovation in this sector. The government has hinted at reviewing the 28 percent levy post-elections, offering a glimmer of hope to the gaming industry.

Future of GST Reforms under NDA 3.0

Experts predict that GST reforms will continue to evolve under the new government, with a focus on enhancing compliance and reducing the administrative burden on businesses. While some contentious issues like rate rationalisation may take a backseat, the overall trajectory of GST reforms is expected to remain positive.

Source: https://www.moneycontrol.com/news/business/nda-3-0-coalition-government-unlikely-to-impact-gst-reforms-power-of-tax-officers-may-be-reviewed-12748608.html

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GST Rate Rationalisation: What the New Government Means

editor — Tue, 11 Jun 2024 04:23:24 +0000

The rationalisation of GST rates will largely depend on the composition of the coalition government at the Centre and the strengthened Opposition in Parliament, with the Congress party advocating for a single-rate regime.

Analysts point out that adjusting GST rates is a complex task. It involves reducing costs for some goods while increasing taxes on others, which could potentially lead to inflation.

One proposal under consideration is reducing the number of rates from four to three. This could be achieved by merging the 12 per cent and 18 per cent rates to form a 15 per cent rate or combining the 5 per cent and 12 per cent rates into an 8 per cent rate.

Currently, there are three standard GST rates: 5 per cent, 12 per cent, and 18 per cent, along with a de-merit rate of 28 per cent.

Efforts to streamline the tax system have been hampered by inflationary concerns, and experts believe these challenges will persist.

A seven-member committee, chaired by Uttar Pradesh’s finance minister Suresh Kumar Khanna, has been working on the rate rationalisation exercise for 1,200 categories of goods and all services, excluding those on the negative list.

Raising the 5 per cent GST rate, which includes essential items such as food and medicines, needs to be done gradually. Similarly, reducing the 18 per cent slab to 15 per cent suddenly would result in significant revenue loss. Therefore, any transition will need to be gradual.

Compulsions

One expert noted that rate rationalisation faces significant challenges due to the new political dynamics. These changes can complicate policy decisions, cause legislative delays, and introduce pressures from various stakeholders, making the process more complex.

Another expert emphasized the need to reconsider exemptions and input tax credit (ITC) restrictions, which have been major sources of litigation.

A simplified rate regime, according to another expert, would help reduce litigation. The new government is expected to provide clarifications on technical aspects, particularly concerning online gaming.

A tax expert highlighted that achieving rate rationalisation requires consensus between the states and the central government on a framework with defined timelines.

Online Gaming

In the online gaming sector, a tax expert noted that the industry has consistently raised concerns about high tax rates. They argue that GST should be calculated based on gross gaming revenue rather than the full face value. Clarity on the retrospective levy of GST would provide certainty to companies facing significant demands.

However, another tax expert believes that a reassessment of online gaming taxation seems unlikely at present, as the industry is adapting to the current tax framework.

An additional expert mentioned that the special regime for taxing “winnings from online games” introduced last year has brought uniformity to the sector.

Source: The Telegraph

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