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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.
