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When GST Notices Haunt Businesses: A Comprehensive Guide

Introduction

In recent times, businesses across the country have been receiving show-cause notices demanding a significant amount of tax related to Goods and Services Tax (GST). These demands, some of which date back to 2017, have caused concerns and confusion among various sectors, including online gaming companies, insurance companies, and small businesses. The Central Board of Excise and Customs (CBIC) needs to take immediate action to provide detailed guidelines for tax officers on conducting GST assessments and train them on the proper usage of these guidelines.

GST on Online Gaming

The controversy surrounding the levy of GST on online gaming has been a topic of much discussion. It was recently clarified that the rate of GST would be 28% on the full amount of the transaction, effective from October 1. Consequently, gaming companies started receiving show-cause notices demanding a substantial amount of tax, some of which were retrospective in nature. However, taxpayers realized that the tax was always applicable on the full value of the bet, and the show-cause notices served as reminders to gaming companies to pay taxes on past dues. To mitigate the impact of GST on customers, some gaming companies are offering bonus vouchers equivalent to the GST component. The final decision on the rate and value on which gaming companies need to discharge their GST liabilities is eagerly awaited from the Supreme Court.

GST on Guarantees

Tax officers across the country have started demanding tax on guarantees provided by companies and their directors to other companies. The GST Council clarified that when no consideration is paid by the company to the director for providing a personal guarantee to banks or financial institutions, the transaction can be treated as having a zero open market value, thereby exempting it from GST. However, the supply of corporate guarantees between related parties would attract a GST of one percent of the amount of the guarantee or the actual consideration, whichever is higher. The usage of the phrase "supply of a corporate guarantee" by the GST Council is noteworthy as it deviates from the typical business terminology of "providing a corporate guarantee."

GST Appellate Tribunal

The establishment of the GST Appellate Tribunal is eagerly awaited by taxpayers, as it would provide them with a platform to file appeals. The GST Council has taken incremental steps towards setting up the tribunal by prescribing the technical criteria for the appointment of judicial members and defining the age limits for the president and members of the tribunal. Additionally, the council has recommended an amnesty scheme to allow taxable persons to file appeals against demand orders under specific conditions. This relaxation will enable taxpayers to file appeals even if they may not succeed at the departmental level.

Changes in GST Rates

The GST Council has made adjustments to the rates of GST on various items based on representations received. For example, millets and other items have seen changes in their GST rates. Another noteworthy announcement relates to the clarification of the GST rate on the job work of converting barley into malt, which has been set at 5%.

Liability of E-Commerce Operators

With effect from January 1, 2022, the liability to pay GST on bus transportation services supplied through Electronic Commerce Operators (ECOs) has been placed on the ECOs themselves. This amendment came as a response to industry associations' representations.

Conclusion

The issuance of show-cause notices demanding GST has become a prevalent issue for businesses in recent times. It is crucial for the CBIC to provide comprehensive guidelines to tax officers and ensure proper training to avoid confusion and unnecessary demands. The decisions and clarifications made by the GST Council, including the rate of GST on online gaming, guarantees, and job work, are significant for businesses to comply with their GST liabilities. The establishment of the GST Appellate Tribunal will provide a platform for taxpayers to seek justice and file appeals. As the GST landscape evolves, businesses must stay informed and adapt to the changing regulations to ensure compliance and avoid any adverse consequences.

author

The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

Frequently Asked Questions

The GST composition scheme is a simplified tax scheme designed for small businesses to reduce compliance burden and tax liabilities by allowing them to pay tax at a fixed rate on their turnover instead of the regular GST rates.

GST notices are official communications from the tax authorities regarding issues related to Goods and Services Tax (GST) compliance. They concern businesses because they may indicate potential tax liabilities or non-compliance with GST regulations.

GST notices are communications made by the GST authorities, meaning they are sent to taxpayers to remind or warn them of any defaults detected, especially non-compliance with GST laws. In some instances, however, these notices may be sent only for information collection purposes.

Based on the Finance Ministry sources, many companies have been getting GST notices since they received these bunches of notices before their due dates which was mainly a seasonal or temporary development. However, it has also been observed that some states may have dispatched more GST notices.

Increased costs of compliance: due to the high compliance costs involved in the GST, it has become hard for SMEs to operate and compete with larger businesses. These include among others, registration under the GST Act, filing of returns prescribed by the GST law, keeping books of accounts in a manner recommended by the Commissioner-General and being audited.
 

There’s a major impact on businesses by the GST. The pricing has changed as an effect of this economic system. This is because GST has different rates of taxes for different goods and services thus business people have to change their prices so as to fit within the new tax regime.
 

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