28% GST on Online Gaming, States’ Compensation; Key Agendas Today

From taxpayers to policymakers, all eyes are set on the two-day meeting of the Goods and Services Tax (GST) Council, starting from Tuesday. GST Council, headed by the finance minister Nirmala Sitharman, is likely to discuss several key issues in the meeting. GST compensation to states, GST rate revisions of certain items and services and easier compliance norms for taxpayers, are on the top agenda of the 47th GST Council meeting.

Extension of GST Compensation to States

While introducing GST in 2017, the Centre had assured the states to compensate them for five years (base year 2015-16) for the revenue losses rising from the implementation of the new regime. The compensation to states will cease on June 30, 2022. However, the cess will continue on a host of sin and luxury items, till March 2026. This move will help the central government to repay for the borrowings to meet the states’ revenue shortfall over the last two financial years, the finance ministry said a in notification last week.

Ahead of the GST Coucil meeting, Kerala’s finance minister KN Balagopal, told CNBC TV-18,”We will be requesting for the extension of compensation window for five years. Not just Kerala, even other states will be seeking an extension as the revenue growth is not as promised.”

The Centre, however, is not in favour to extend the compensation cess for another five years, according to reports.

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GST Rate Revision

The Fitment Committee has recommended to revise the GST rates on a handful of items. The committee proposed a uniform rate of 5 per cent GST on prostheses (artificial limbs) and orthopaedic implants (trauma, spine, and arthoplasty implants). It also recommended 5 per cent GST rate for several kind of orthoses such splints, braces, belts and calipers. GST rates on ostomy appliances (including pouch or flange, stoma adhesive paste, barrier cream, irrigator kit, sleeves, belt, micro-pore tapes) should be reduced to 5 per cent, from 12 per cent at present, advised Fitment Committee, among other measures.

GST Council is likely to discuss the suggestions of tweaking rates and issuing clarification on the categorisation of the other items too.

28% GST on Online Gaming, Casinos, Race Courses

A flat rate of 28 per cent GST can be applied on popular online gaming, casinos and horse racing as suggested the group of ministers (GoM). In May 2021, the Union government had set up a panel of state ministers to examine the valuations of several services related to casinos, online gaming portal and race courses for levying GST. The GoM are in the favour of imposing flat 28 per cent GST on various services of the fantasy gaming, casinos and horse racing. The GST Council is likely to take a decision on this during June 28-29 meeting.

Amendments in GSTR Return

“As always, simplification and further easing of compliances including allowing amendment or rectification in the GSTR returns may be expected,” said Mahesh Jaising, partner and indirect tax leader, Deloitte India.

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In the wake of Covid-19 outbreak, the GST Council may ease the the requirement for filing refund claims between March 1, 2020, and February 28, 2022. It is likely to extend the timeline for filing GSTR 4 for FY22 without late fees to July 28 from the earlier deadline of June 30, 2022.

Recovery of Input Tax Credit

One the most pressing issues has been of the differential treatment of refund of input services vis-à-vis inputs in case of an inverted duty structure. “This results in credit piling up and increased cost to customer. Industry hopes that the refund provisions in case of inverted duty structure are extended to cover input services as well,” explained Jaising.

The GST Council is likely to discuss this issue during the two-day meeting. “Further expectations are that restrictions in various types of credits does not ensure seamless credit as envisaged under GST. The same needs to be revisited and relaxed. One time amnesty scheme should be explored to enable trade to rectify errors made at the time of introducing GST,” said  Parag Mehta, Partner, N.A. Shah Associates,

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