Summary: The International Monetary Fund (IMF) has increased India’s GDP growth forecast for FY 2024-25 to 7%, reaffirming its position as the fastest-growing major economy. This forecast is supported by strong performance in the manufacturing and agriculture sectors. Meanwhile, the Finance (No. 2) Bill, 2024, was passed by both houses of Parliament, with significant implications for the Goods and Services Tax (GST) regime. Notably, demands to exempt life and medical insurance premiums from GST were rejected. The GST is expected to contribute 18% of the total revenue, with amendments aimed at simplifying the tax structure and reducing disputes. A comprehensive review of GST rates is planned within six months. The GST Council’s 53rd meeting is set for September 2024, where topics like taxability of TDR/JDA agreements and rate rationalization will be discussed. Additionally, the recent Supreme Court ruling clarified that royalty payments to the Central Government by mining companies are not considered a tax. Efforts to combat GST evasion are intensifying, with a new drive targeting fake registrations. The establishment of the GST Appellate Tribunal is also progressing, with state benches being notified. These developments highlight India’s focus on economic growth, tax reform, and improving the ease of doing business.
Recently, IMF has in its World Economic Out Loose update, raised India’s GDP growth forecast for FY 2024-25 to 7% from 6.8% and re-affirming it as the fastest growing economy. India is followed by China (5%), Russia (3.2%), Nigeria (3.1%), US (2.6%) and so on. Taking cue from the performance of the manufacturing sector, supported by a possible rebound in the agriculture sector, the Asian Development Bank (ADB) has also retained India’s GDP forecast at 7 percent for fiscal year 2024-25.
The Finance (No.2) Bill, 2024 introduced in Parliament on 22 July, 2024 has been passed with amendments in the Lok Sabha on 8th August, 2024 and Rajya Sabha on 9th August, 2024. The Budget session of Parliament has now been adjourned. The demand for exempting life insurance and medical insurance premium from levy of GST has been turned down. It has been stated that of the 18 percent GST on medical insurance, about half of the same goes to states directly and from the balance, 41% moves into the devolution pool which also goes to states, implying that a total of 74% of tax collection goes to states. Finance (No. 2) Act, 2024 has since been enacted on 16 August, 2024 after the assent of President. The specific sections of CGST shall be notified by way of separate notifications in due course.
GST is expected to constitute about 18% of total revenue whereas other indirect taxes may fetch about 10%. The amendments carried out in GST law are based on GST Council’s recommendations. It has been said that a comprehensive review of rates shall be done in next 6 months time to rationalize and simplify for ease of trade, removal of duty inversion and reduction of disputes. On a broader overview, budget is seen as a vision document for next five years. Tax revenue as well as tax revenue as percentage to GDP is also on a rise.
Indirect tax structure will move towards minimum tax slabs and that existing classification under GST and customs shall be overhauled. In GST, 3 slabs is feasible which is a median slab, a lower slab for the goods and services for common man and a higher rate slab for items used by the affluent class. Next (53rd) GST Council meeting is scheduled to be held on 9th September, 2024 in New Delhi. It may inter alia, discuss on taxability of TDR / JDA agreements, rate rationalization, notices issued to Infosys’s etc.
Companies with head offices or branch offices outside India will not get any new show cause notice now under GST for FY 2017-18 as the due date for the same was 5th August, 2024.
GST is expected to constitute about 18% of total revenue whereas other indirect taxes may fetch about 10%. The amendments carried out in GST law are based on GST Council’s recommendations. It has been said that a comprehensive review of rates shall be done in next 6 months time to rationalize and simplify for ease of trade, removal of duty inversion and reduction of disputes. On a broader overview, budget is seen as a vision document for next five years. Tax revenue as well as tax revenue as percentage to GDP is also on a rise.
Recenlty, larger bench of Apex Court in majority decision (8:1) held that state’s power to tax is not limited by Parliament’s Mines and Minerals (Development and Regulation) Act, 1957. It thus held that royalty paid by mining companies to the Central Government is not a tax.
Revenue secretary in a recent conference of Enforcement Chiefs of State & Central GST formations stressed on maintainability a balance between enforcement actions and ease of doing business, besides focusing on real tax evasion. He also emphasized on staying connected to trade and industry and reducing the need for intrusive enforcement action by enabling proactive compliances.
The second special drive to need out fake GST registration has begun w.e.f. 16.08.2024 and shall continue till 15.10.2024. Based on risk parameters, about 60,000 firms are already on radar. According to one press release of DGGI, it has detected tax evasion of Rs. 1.2 trillion by way of fake ITC since 2020. CAG of India has advised MOF to identify high risk parameters in GST composition scheme on a regular basis and also undertake verification to check tax evasion.
The Constitution of GST Appellate Tribunal in India seems to be happening soon. MoF has issued notification for constitution of state benches on 31st July, 2024. On the GST Tribunal (GSTAT) front, the process of recruitment of members and setting up of infrastructure is on and with the notification of benches including circuit benches on 31st July, 2024, it can be expected that GST Appellate Tribunals may see the light of the day in near future.
Recenlty, larger bench of Apex Court in majority decision (8:1) held that state’s power to tax is not limited by Parliament’s Mines and Minerals (Development and Regulation) Act, 1957. It thus held that royalty paid by mining companies to the Central Government is not a tax.
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