Siddharth Surana, Director, RSM India
The 50th GST Council Meet addressed several significant aspects related to GST compliances. This article provides an analysis of the council’s decisions, including clarifications on online gaming taxation, the formation of the GST Appellate Tribunal, updates on the Input Service Distributor mechanism, warranty replacements, e-way bills for gold and precious stones, taxation of pan masala and guthka, and revised GST rates for food and beverages in cinema halls.
Online Gaming One of the issues that has been doing the rounds for a while is that of GST on online gaming. There has been a lot of debate on how online gaming would be taxed in GST and more specifically on the valuation of these supplies in case they are to be taxed. The GST Council has proposed that online gaming would be taxed at the rate of 28% and the GST would need to be levied on the full value of the bet placed. We are yet to see the formal notification but it does seem that the 28% GST rate and consideration of the full value of bet placed would be applicable on both games of skill and games of chance.
Goods and Services Tax Appellate Tribunal The GST Tribunal represents the second stage of appeal in the GST judiciary. The GST Tribunal is yet to be formed and we understand that while this is a priority and focus area for the government, there are some teething challenges in constitution of this judicial body. Currently, taxpayers who are aggrieved by adverse orders passed by the authorities are compelled to approach High Courts for redress. This is resulting in delays in serving justice and also not bringing any clarity with regards to interpretation of vexed issues in GST. The GST Council in its recent meeting has recommended Rules governing the constitution of members and president of GST Appellate Tribunals and has also recommended to notify provisions of Finance Act 2023 pertaining to Appellate Tribunal. This is certainly a step in the right direction and is a positive endeavour to operationalise the GST appellate Tribunal.
Clarifications with respect to Input Service Distributor mechanism: The ISD mechanism under GST become important for businesses that are operating in various states. GST being a federal system of taxation requires compliances to be done for each state. A company having registered presence in different states needs to consider each such registered presence as a separate person for GST purposes. Generally the head offices incur common expenses that may be beneficial to other states as well. There was confusion on whether these common costs need to be compulsorily distributed through an ISD mechanism, which was because of various advance rulings. These rulings seem to suggest that ISD registration was mandatory and the only mechanism to distribute third-party vendor’s input tax credit on common costs. The Council has recommended to clarify through a circular that Input Services Distributor (ISD) mechanism is not mandatory for the distribution of input tax credit of common input services procured from third parties to distinct persons as per the present provisions of GST law. Such a circular when issued would bring much clarity on the topic.
Warranty replacement: The taxability of warranties and that of after-sales services has been debatable under GST. There are issues not only with respect to the taxability of these as such, but also regarding the tax treatment of parts used in providing the warranty. The GST Council has recommended issuing a Circular to clarify both taxability of warranty as well as the need to reverse the input tax credit when parts are given free of cost. Such a circular when issued would bring much clarity on the topic.
E-way bill for movement of gold/ Precious stones: At present under the GST law, there is a requirement to issue an e-way bill for every movement of goods whose value exceeds Rs. 50,000. This was not applicable to gold and precious stones. The GST Council has made a recommendation to extend the requirement for generation of E-way bill to movement of gold/ Precious stone. We understand this will cover not only the inter state movements but may also cover movements within the same State.
Taxability of pan masala and guthka: The GST Council had, in the earlier Council meetings, constituted a Group of Ministers to look into capacity-based taxation for commodities like pan masala and guthka. There is an issue of tax evasion in these products and it was proposed to introduce a tax based on maximum retail prices of these commodities and to shift the burden of taxation to the manufacturing stage. The Group of Ministers felt that efforts should be focused on maximising GST collections at first stage of manufacture as the leakages were found to be concentrated at the retailer levels. The GST Council, in this present meeting has recommended to issue a notification which would provide a special procedure to be followed by the manufacturers of tobacco, pan masala & other similar items for registration of machines and for filing of special monthly returns. There are also proposals to issue notifications to restrict the refund on exports of these items.
Food and Beverage in Cinema Hall: It has been decided to clarify that supply of food and beverages in cinema halls is taxable as restaurant service and would attract 5% GST as against 18% GST at present. These are subject to certain conditions. It has also been clarified that where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema.
Conclusion: The 50th GST Council Meet addressed various critical issues related to GST compliances. The decisions taken by the council, including clarifications on online gaming taxation, the formation of the GST Appellate Tribunal, input service distributor mechanism, warranty replacements, e-way bills for gold and precious stones, taxation of pan masala and guthka, and revised GST rates for food and beverages in cinema halls, aim to streamline processes, provide clarity, and enhance compliance in the GST framework.
Sir,
Whether the decision of GST council for taxing Games on full value of the bet placed,.is Constitutionally valid.
Refer my analysis in (2023) J.K.Jains GST & VR 1 in the case of GAMESKRAFT TECHNOLOGIES PRIVATE LIMITED v, DGGI & Ors.(Bom)
CA Om Prakash Jain s/o J.K.jain, Jaipur
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