Explained | How can the government include ATF as a part of GST?

The Indian aviation sector is once again staring at all-time high prices of aviation turbine fuel (ATF) after prices were hiked for the ninth time on May 1 due to a surge in global energy prices.

ATF prices were hiked by 3.22 percent or Rs 3,649.13 per kl in Delhi to Rs 1,16,851.46 per kl, increasing stress on airlines as jet fuel constitutes nearly 40 percent of the operating cost of an airline

Airlines in India have to find a way around rising ATF prices even as the industry is stepping up operations to cater to rising demand after two years of the COVID-19 pandemic and fare caps imposed by the government are still in place.

While the Ministry of Civil Aviation is working with states to reduce the value-added tax (VAT) applicable on ATF, VAT rates at most major airports in India are still quite high.

For example, in Maharashtra, VAT on ATF is 25 percent in Mumbai and Pune but 5 percent at other airports. Similarly, in Tamil Nadu and Gujarat, VAT on ATF for the Trichy airport and Rajkot airports is 5 percent, but 29 percent for all other airports in the two states.

The aviation industry wants the government to include ATF under the goods and services tax (GST) to benefit from input tax credit and reduce the stress on operations.

“If ATF is included as a part of GST, airlines will enjoy the benefit of input tax credit which is currently not applicable as jet fuel is taxed under VAT. The input tax credit will bring down the stress of high ATF prices for airlines considerably,” a senior official from a domestic airline said.

The aviation ministry has also asked the finance ministry to bring ATF under the ambit of GST at an applicable rate not higher than 12 percent with a full input tax credit.

The Union government is expected to discuss this issue at the next meeting of the GST Council, finance minister Nirmala Sitharaman had said in February.

But how can the government include ATF under GST?

ATF can come under the ambit of GST only if the GST Council, which is made up of all state finance ministers, agrees.

However, ATF is a product that is of interest to only 15 states because not every state has the infrastructure to carry out aircraft refueling at airports. And ATF sales can only happen at airports with refueling facilities.

Of the 15 states that have such infrastructure, seven—Karnataka, Delhi, Maharashtra, Kerala, West Bengal, Tamil Nadu, and Gujarat—account for the bulk of the demand for ATF in India, as they have multiple airports with refueling infrastructure and handle the most number of domestic and international flights operating in the country.

If ATF is included under GST, these seven states will have to stop charging VAT on jet fuel and the central government will have to stop charging excise duty on ATF. So in order for jet fuel to be included under GST, these seven key states and the Union government will have to come to an understanding.

Methodology to include ATF under GST

Senior government officials said that an Integrated GST model is being discussed in order to include jet fuel under GST.

“The fitment committee is expected to recommend an IGST model to include ATF under GST,” a senior government official said.

IGST is a tax under the GST regime that is applied on the interstate (between two states) supply of goods and/or services as well as on imports and exports.

The fitment committee comprises officers from various states and makes suggestions on tax rate changes to the GST Council.

“Output tax on the sale of tickets both on business and economy air passenger transport services may be levied at a uniform rate of 12 percent. Output tax on air cargo transport and ancillary services such as catering, premium services, and services on add-ons may be levied at 12 percent. Airlines may be allowed a full input tax credit for GST paid on all goods and services,” another government official said.

Advantages of including ATF under GST

While the seven states meet most of India’s ATF demand, some domestic airlines in the last two years have started operating flights to alternative airports with a lower VAT rate to carry out refueling, multiple markets experts said.

“Most domestic flights operating between Delhi and Kerala have a stopover at airports in Tamil Nadu in order to carry out refueling as the VAT rate in Delhi and Kerala is much higher when compared to Tamil Nadu,” a tax expert from Deloitte said. He added that this has led to revenue erosion from VAT for some states.

“If jet fuel is included under GST, airlines can start operating more direct domestic flights and won’t have to consider alternative routes in order to reduce the burden of high jet fuel,” another senior executive from a domestic airline said.

He added that the inclusion of ATF under GST will also prompt more states to set up refueling infrastructure.

Similarly, multiple market experts said that If IGST is imposed on ATF, states that handle most of India’s ATF refueling will not suffer an erosion of revenue collection from tax because airlines will stop looking for alternative routes to carry out refueling.

Online gaming industry opposes 28% tax bracket; demands 18% GST

The online gaming industry has made a pitch to the government against raising GST rates to protect the industry from degrowth. Multiple industry experts have demanded the continuation of 18% GST on online gaming, opposing the clubbing of the industry in the 28% bracket along with racing, gambling and betting. The step was taken after the Group of Ministers (GoM) tasked by the GST Council met to look into matters related to the GST regime covering online gaming, casinos and race courses. As per data, the online gaming industry has potential to generate revenue and employment opportunities in near future, and a proposal to levy GST on 28% of the entry fee and 115 % surcharge instead of platform fee /gross gaming revenue (GGR) will make the industry commercially unviable.

The international online gaming industry tax structures in countries such as the USA, UK, Australia and Germany, highlights how they levy tax on GGR at a rate between 15-20%, Gopal Jain, senior advocate, Supreme Court of India, said, “We’ve seen internationally that markets which started taxing the prize pool instead of the GGR have had to revert back to taxing only to GGR as it resulted in non-compliance, revenue leakage and grey markets,” he added.

Advocating the need for levying tax on GGR alone, the online gaming industry has maintained that taxing on GGR instead of the prize pool has proven to increase tax revenue in the long term. And with international learnings also indicating the same, several recommendations have been sent to the GST council, ahead of the scheduled meeting, to plug revenue leakage by preventing shift of the business to the grey market and discourage non-compliance with a prevalent global practice.

For Rameesh Kailasam, chief executive officer, IndiaTech.Org, the potential of the online gaming industry in India needs to be tapped rightfully. “It is necessary that games involving skill should ideally be taxed at 18% on the platform fee. The GoM should ideally take a positive view and recommend continuance of the current practice of considering the platform fee/GGR as value of supply. Since online skill-based gaming is not gambling or betting or wagering, a clarification needs to be issued to resolve litigation and provide relief to the industry,” he opined.

“A higher tax burden will make the industry unviable, and online gaming platforms have appealed to the government on numerous occasions to not treat skill based online games same as gambling while sharing a case in point on how a different and rational tax treatment of online skill based games can help in eliminating non-compliance, leakage of revenue and grey markets,” S Krishnan, advocate, sports law and taxation, highlighted.

Experts believe that the industry will suffer significantly if the current taxation regime is changed. In addition, transactions on online gaming platforms are 100% digital and they have a significant contribution to ‘digital India’. Moreover, the online gaming industry is believed to play a role in taking the startup spirit in the country to the next level and further boost India’s AVGC sector. Additionally, if uncertainty in policy-making and taxation for skill-based online gaming are resolved, the industry can attract increased FDI and growth, therefore enhancing consumer interest and tax revenue. It can help the government in the long term and make India a dominant global force in AVGC, according to the experts.

According to a 2021 report by BCG and Sequoia on the Indian mobile gaming market, the Indian online gaming industry is expected to triple to around $5 billion market opportunity by 2025. Gaming is a $1.8 billion sunrise sector in India and is still relatively small (1% of global), but it is growing (38% CAGR). According to the recent FIFS-Deloitte report, fantasy sports has the potential to attract Rs 15,000 crore of FDI in the next three years.

SOURCE:https://www.financialexpress.com/brandwagon/online-gaming-industry-opposes-28-bracket-demands-18-gst/2515733/

Explained | How can the government include ATF as a part of GST?

The Indian aviation sector is once again staring at all-time high prices of aviation turbine fuel (ATF) after prices were hiked for the ninth time on May 1 due to a surge in global energy prices.

ATF prices were hiked by 3.22 percent or Rs 3,649.13 per kl in Delhi to Rs 1,16,851.46 per kl, increasing stress on airlines as jet fuel constitutes nearly 40 percent of the operating cost of an airline

Airlines in India have to find a way around rising ATF prices even as the industry is stepping up operations to cater to rising demand after two years of the COVID-19 pandemic and fare caps imposed by the government are still in place.

While the Ministry of Civil Aviation is working with states to reduce the value-added tax (VAT) applicable on ATF, VAT rates at most major airports in India are still quite high.

For example, in Maharashtra, VAT on ATF is 25 percent in Mumbai and Pune but 5 percent at other airports. Similarly, in Tamil Nadu and Gujarat, VAT on ATF for the Trichy airport and Rajkot airports is 5 percent, but 29 percent for all other airports in the two states.

The aviation industry wants the government to include ATF under the goods and services tax (GST) to benefit from input tax credit and reduce the stress on operations.

“If ATF is included as a part of GST, airlines will enjoy the benefit of input tax credit which is currently not applicable as jet fuel is taxed under VAT. The input tax credit will bring down the stress of high ATF prices for airlines considerably,” a senior official from a domestic airline said.

The aviation ministry has also asked the finance ministry to bring ATF under the ambit of GST at an applicable rate not higher than 12 percent with a full input tax credit.

The Union government is expected to discuss this issue at the next meeting of the GST Council, finance minister Nirmala Sitharaman had said in February.

But how can the government include ATF under GST?

ATF can come under the ambit of GST only if the GST Council, which is made up of all state finance ministers, agrees.

However, ATF is a product that is of interest to only 15 states because not every state has the infrastructure to carry out aircraft refueling at airports. And ATF sales can only happen at airports with refueling facilities.

Of the 15 states that have such infrastructure, seven—Karnataka, Delhi, Maharashtra, Kerala, West Bengal, Tamil Nadu, and Gujarat—account for the bulk of the demand for ATF in India, as they have multiple airports with refueling infrastructure and handle the most number of domestic and international flights operating in the country.

If ATF is included under GST, these seven states will have to stop charging VAT on jet fuel and the central government will have to stop charging excise duty on ATF. So in order for jet fuel to be included under GST, these seven key states and the Union government will have to come to an understanding.

Methodology to include ATF under GST

Senior government officials said that an Integrated GST model is being discussed in order to include jet fuel under GST.

“The fitment committee is expected to recommend an IGST model to include ATF under GST,” a senior government official said.

IGST is a tax under the GST regime that is applied on the interstate (between two states) supply of goods and/or services as well as on imports and exports.

The fitment committee comprises officers from various states and makes suggestions on tax rate changes to the GST Council.

“Output tax on the sale of tickets both on business and economy air passenger transport services may be levied at a uniform rate of 12 percent. Output tax on air cargo transport and ancillary services such as catering, premium services, and services on add-ons may be levied at 12 percent. Airlines may be allowed a full input tax credit for GST paid on all goods and services,” another government official said.

Advantages of including ATF under GST

While the seven states meet most of India’s ATF demand, some domestic airlines in the last two years have started operating flights to alternative airports with a lower VAT rate to carry out refueling, multiple markets experts said.

“Most domestic flights operating between Delhi and Kerala have a stopover at airports in Tamil Nadu in order to carry out refueling as the VAT rate in Delhi and Kerala is much higher when compared to Tamil Nadu,” a tax expert from Deloitte said. He added that this has led to revenue erosion from VAT for some states.

“If jet fuel is included under GST, airlines can start operating more direct domestic flights and won’t have to consider alternative routes in order to reduce the burden of high jet fuel,” another senior executive from a domestic airline said.

He added that the inclusion of ATF under GST will also prompt more states to set up refueling infrastructure.

Similarly, multiple market experts said that If IGST is imposed on ATF, states that handle most of India’s ATF refueling will not suffer an erosion of revenue collection from tax because airlines will stop looking for alternative routes to carry out refueling.

SOURCE:https://www.moneycontrol.com/news/coronavirus/covid-19-update-almost-3-times-as-many-died-as-a-result-of-coronavirus-than-officially-reported-who-8459541.html

Food Min pitches for 5% GST on de-oiled rice bran

The Union Food Ministry has suggested imposing a 5 per cent GST on de-oiled rice bran to discourage use of the product for feed purpose, Food Secretary Sudhanshu Pandey said on Wednesday.

”We have written to the Finance Ministry to impose 5 per cent GST on de-oiled rice bran,” Pandey said at a press conference here.

At present, about 5 per cent GST (Goods and Services Tax) is applicable on rice bran (before oil extraction) and crude rice bran oil.

Imposition of a levy on de-oiled rice bran will discourage the sale of rice bran directly to feed manufacturers and the product will be available for oil extraction, Pandey said.

The issue will be decided in the GST Council, he added.

Amid increased dependence on edible oil imports, the country needs to increase the domestic production of rice bran oil as now only 60 per cent of the capacity is being utilised.

On rising retail edible oil prices, the secretary said the government has taken it seriously and an oil palm mission has been launched to boost local production.

”We cannot solve the edible oil problem overnight because it is a reality that supplies from some areas have been affected,” he said.

The entire market has been affected after Indonesia recently banned palm oil exports. But there won’t be impact on supplies to India as the country has 40-45 days’ of stock, he said.

Further, Indonesia has to export at some point as the country has a capacity of 460 lakh tonnes of palm oils against its domestic requirement of 200 lakh tonnes, Pandey said.

India meets about 60 per cent of its domestic demand of edible oil through imports. The rise in global prices has pushed up retail prices, causing food inflation.

SOURCE:https://www.businesstoday.in/latest/story/food-min-pitches-for-5-gst-on-de-oiled-rice-bran-332348-2022-05-04

 

Odisha records 28 per cent growth in gross GST collection in April

BHUBANESWAR: The State has made a highest-ever collection of Rs 1714.78 crore goods and services tax (GST) during April 2022 against Rs 1126.67 crore during the same period a year ago, registering a growth of 52.2 per cent. The April collection surpassed the previous highest collection recorded in the month of March by a big margin of Rs 363.53 crore.

Similarly, the State has also maintained the highest growth rate of gross GST amongst the major states with a collection of Rs 4,910.23 crore during April as against Rs 3,849.48 crore collected during the same month in 2021, registering a growth of 28 per cent.

The gross collection during April this year is also the highest in a month since the inception of GST. There is a collection of Rs 1,381.00 crore in CGST (45 per cent growth) and Rs 722.40 crore in Cess (18 per cent growth).

However, IGST monthly settlement has shown a negative growth of 89 per cent owing to substantial increase in interstate sale during the month. The VAT collection from petrol and liquor was Rs 232.88 crore during this April as against Rs 224.25 crore during the same month last year.

The collection from petroleum products is Rs 176.52 crore and Rs 56.36 crore from liquor. The high growth in gross GST was led by mining, manufacturing and trading sectors with growth of 179 per cent, 270 per cent and 105 per cent respectively.

In the last financial year, Rs 479.08 crore was collected in cash after raising demand from wrong return filers while Rs 36.23 crore was collected as interest from late filers. As many as 3,145 new taxpayers have been brought under the GST fold, said Commissioner of CT & GST Sushil Kumar Lohani.

GST signals: On April GST collections

 The first month of the new financial year has yielded a sharp surge in Goods and Services Tax (GST) collections, taking them well past ₹1.67 lakh crore — the highest, by a wide margin, in the five years since the levy was introduced by subsuming myriad State and central duties. In fact, GST revenues have scaled fresh highs in three of the last four months, having hit ₹1.41 lakh crore in January and ₹1.42 lakh crore in March. Overall GST revenues had grown 30.8% in 2021-22 to ₹14.9 lakh crore, despite slipping below the ₹1 lakh crore mark for two months when the second COVID-19 wave raged. The 20% year-on-year revenue uptick this April could be seen as a comforting signal about 2022-23 revenue prospects for policy makers at the Centre and the States, whose treasuries are fretting about the prospect of income falling off a cliff from this July when the assured compensation for implementing the GST comes to an end. Compensation cess levies will persist till at least March 2026, but they will be used to pay off special borrowings of 2020-21 to bridge revenue shortfalls and recompense States. The Centre needs a mechanism to expedite payment of outstanding compensation dues to States (₹78,700-odd crore, or four months of dues). The Finance Ministry has blamed ‘inadequate balance’ in the Compensation Cess fund, and promised to pay up ‘as and when’ the requisite cess accrues.

If overall GST collections sustain around April levels, a dialogue with States on their pending dues along with those that will accrue from now till June, could become less thorny. But the conversation needs to begin soon. The GST Council, which has not met properly since September 2021, must be convened at the earliest. Higher tax inflows backed by improved compliance, should give the Council more flexibility to approach the impending rationalisation of the GST rate slabs, beyond a mere scramble to fill coffers and factor in larger socio-economic considerations. The Centre, which called the April inflows a sign of ‘faster recovery’, must also state whether these revenue levels warrant a rethink of its concern that the effective GST tax rate had slipped from the revenue-neutral rate envisaged at its launch. A clear acknowledgement is also needed that the higher revenues are not solely driven by a rebound in economic activity. Persistently higher input costs facing producers for a year and their accelerating pass-through to consumers, seen in higher retail inflation, have contributed too, along with tighter input credit norms introduced in the Union Budget. That revenue growth from goods imports has outpaced domestic transactions significantly in recent months, also suggests India’s consumption story is yet to fully resurface. Urgent policy action is needed to rein in the inflation rally and bolster consumer sentiment, so as not to sink hopes of more investments, faster growth and even greater revenues.

SOURCE:https://www.thehindu.com/opinion/editorial/gst-signals/article65376087.ece

Fair GST implementation on skill-based online games could reshape the Indian online gaming sector

The Indian online gaming industry has been flourishing in the past few years with the emergence of new startups and has witnessed a considerable amount of positive economic impact. This sunrise sector in India has gained significant momentum due to the ‘Digital India’ initiative by the Prime Minister which promotes internet access to citizens at affordable rates, penetration of the use of mobiles across social and demographic barriers and India’s enthusiasm to adopt and adapt to the online gaming platforms. However, despite the encouragement and positive feedback received from the government, the industry awaits a clear judgment on GST restructuring and rate rationalisations on the online games.

To determine whether or not GST is applicable on the total transaction value, which includes the prize money, or the net commissions (revenues) that accrue to gaming firms, the GST Council and Ministry of Finance had formed a Group of Ministers (GoM). With that, the GOM is also tasked with coming up with recommendations on the GST rate to be applicable. However, the committee which was formed last year in May was dissolved and a new one was formed earlier in February 2022.

Since there’s tremendous potential in this sunrise sector, it calls for an urgent need to look at the GST levied on the industry.

Currently, services provided by online skill gaming platforms are classified under service accounting code 998439 of the GST services classification and is subjected to 18 percent on the Gross Gaming Revenue (GGR) for the service provider whereas, the games of chance attract 28% GST.

In addition, the Contest Entry Amount (CEA) which normally includes platform fee or GGR is usually between 5% – 15% and Prize Pool which is in the bracket of 85% – 95%. In most games, the average ticket size is between Rs. 25 and 35.

To put it simply: In real-money games, players have to pay an entry fee to join a gaming tournament and the total amount collected in this process less the platform fee is called the prize pool money. Different companies deal with different models of holding the prize pool money. In some cases, platforms could choose to hold the money received in a separate electronic ledger by third party service providers or payment gateways, wallets, etc. This pooled amount is later distributed among the players as prize money and the company earns a percentage (5% – 15% percent) on this amount as platform fee.

Leading global regulated markets including the UK, most countries in the EU, and Nevada, New Jersey in the US, tax on gross gaming revenue at the rate of 15% to 20%.

Moreover, Rule 31A of CGST Rules 2017 (‘Rule 31A’) deals with valuation of supply of actionable claim in cases of lottery, betting, gambling and horse racing, so as to fall within the rigours of Rule 31A which applies, according to the said rule, only to activities involving “chance to win in betting, gambling or horse racing”.

Rule 31A(3) reads as “(3) The value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalisator.”

Since Rule 31A uses the word ‘chance’ before describing the activity it is clear that the said rule does not apply to online games based of skill. Hence this means that Rule 31A strictly applies to games involving betting, gambling or horse racing, etc.

The games of skill are not covered explicitly under the existing GST framework and the tax authorities sometimes neglect the difference between games of skill and games of chance. This clear distinction is critical as in the cases of lottery, betting, gambling and horse racing, 100 percent of the face value of the bet or amount paid into the totalisator is considered for GST.

“Actionable Claim other than lottery, betting and gambling” is covered under Entry 6 of Schedule III of CGST Act 2017. Since prize pool money is an actionable claim it is therefore exempt from levy of GST.

Hence on those lines only GGR or the platform fee should continue to be considered as the value of supply. Additionally, if there are other formats or revenue models followed by platforms such as entry fee, subscription fee, in game revenue, etc., GST should be applicable on the amount received by the platform for rendering its services.

Earlier, in erudite judgments, Rajasthan high court, Bombay high court and the Punjab & Haryana high court (upheld by the Supreme Court in appeal) quashed state laws that criminalized online games involving skill.

We urge the government to iron out the ambiguities and clarify that Rule 31A is not intended to cover games of skill and therefore is not applicable to any form of online gaming where the superior skill and technical knowledge of a gamer is dominant.  Alternatively, we recommend the government shall also consider carving out a separate rule specifically for skill based games where the GST rate applies only on the platform fee, just in the case of any other online platform supplying goods and services.

We recommend that in cases where the gaming companies’ revenue model includes a subscription fee, in-game revenues etc, GST should be applicable on only the amount received by the platform. Additionally, skill predominant games should ideally be taxed at 18 percent on the platform fee, as higher tax rates can impact the industry’s growth.

Any attempt to levy GST on the entire stake value is bound to alter player and compliance behaviour and will neither work in the benefit of the gaming industry nor the government. This as a result can hamper this booming industry’s upward trajectory and could encourage closure of businesses in the sector. The online gaming industry is need of a GST regime that can protect and promote the segment that houses over 900 Indian gaming startups.

SOURCE:https://www.financialexpress.com/brandwagon/fair-gst-implementation-on-skill-based-online-games-could-reshape-the-indian-online-gaming-sector/2509819/

GST collection touches record ₹1.68 lakh crore in April: Finance ministry

NEW DELHI: The Goods and Services Tax (GST) revenues surpassed the 1.5 lakh crore mark for the first time while maintaining its streak of record collections for the second time in a row with highest ever gross collections in April at 1,67,540 crore, nearly 18% more than the previous record of 1,42,095 crore in March on the back of faster economic recovery, better tax administration and increased compliance, the union finance ministry said in a statement on Sunday.

The month also saw the highest ever tax collection in a single day on April 20, 2022 when 57,847 crore was paid through 9.58 lakh transactions, the ministry said. The highest single day payment on the same date last year was 48,000 crore through 7.22 lakh transactions.

“This shows clear improvement in the compliance behaviour, which has been a result of various measures taken by the tax administration to nudge taxpayers to file returns timely, to making compliance easier and smoother and strict enforcement action taken against errant taxpayers identified based on data analytics and artificial intelligence,” the ministry said.

This is the 10th month in a row that the GST revenues crossed 1 lakh crore mark and the record collection of 1,67,540 crore in April is 19.92% higher than 1,39,708 crore achieved in the same month a year ago, according to official data.

 

The gross revenue collected in the month of April, 2022 has 33,159 crore central GST (CGST) component, 41,793 crore state GST (SGST) and 81,939 crore integrated GST (IGST) which includes 36,705 crore collected on import of goods. Cess collections in the month was 10,649 crore, including 857 crore collected on import of goods.

The government has settled 33,423 crore to CGST and 26,962 crore to SGST from IGST. The total revenue of Centre and the states in the month of April 2022 after regular settlement is 66,582 crore for CGST and 68,755 crore for the SGST, the finance ministry said.

Total number of e-way bills generated in the month of March 2022 was 7.7 crore, 13% higher than 6.8 crore e-way bills generated in the month of February 2022, which reflects recovery of business activity at faster pace, it said.

Karnataka High Court backs simultaneous levy of excise duty, GST on tobacco

A two-judge bench, comprising justice Alok Aradhe and justice S Vishwajith Shetty, basically upheld the earlier order by a single bench of the court in this regard

Karnataka High Court has upheld the constitutional validity of the imposition of central excise duty, national calamity contingent duty (NCCD) simultaneously with the goods and services tax (GST) on tobacco and tobacco products.

A two-judge bench, comprising justice Alok Aradhe and justice S Vishwajith Shetty, basically upheld the earlier order by a single bench of the court in this regard.

The court ruled that the taxable event for levy of excise duty would be manufacturing of tobacco and the tobacco products and for levy of GST, the taxable event would be supply of tobacco and tobacco products.

V.S. Products, a proprietary firm engaged in the manufacturing of tobacco and tobacco products, challenged the continuation of excise duty and NCCD even after introduction of GST from July one, 2017. Currently, excise duty at 0.5 per cent and NCCD at 25 per cent are imposed on tobacco. However, an abatement of 55 per cent is given which means the effective rate of taxation is 11.475 per cent.  is levied on supply of tobacco products at 28 per cent and on tobacco leaves at 5 per cent. Besides, compensation cess at different rates is also levied.

The company stated that the levy of excise duty on tobacco and tobacco products along with GST amounts to hostile discrimination and is violative of Article 14 which guarantees equality before the law to all persons. It said tobacco and tobacco products are the only goods which have been singled out for hostile and discriminatory treatment subjecting it to two regimes of indirect taxations.

However, the court said that except for alcoholic liquor for human consumption, petroleum and petroleum products, stamp duty, tobacco and tobacco products and opium, all other goods are liable only to GST.

Tobacco, or tobacco products, are brought to GST and excise duty, whereas opium is brought to GST and is also subject to value added tax, the court ruled.

The court said the levy of excise duty on tobacco and tobacco products is a matter of public policy and that it would not interfere with the same.

Sandeep Sehgal, partner at Tax, AKM Global, a tax and consulting firm, said, the high court has made a distinction with respect to double taxation on tobacco products and upheld the levy of excise duty, NCCD and GST simultaneously.

SOURCE:https://www.business-standard.com/article/current-affairs/karnataka-high-court-back-simultaneous-levy-of-excise-duty-gst-on-tobacco-122043000251_1.html

Group of Ministers to meet on May 2 to discuss GST related to casinos, online gaming

The Group of Ministers (GoM) set up by the Union Ministry of Finance to look into matters related to GST regime covering casinos, race courses and online gaming will hold a crucial meet on May 2 in Delhi.

Meghalaya Chief Minister Conrad Sangma is the convenor of the GoM. He replaced Gujarat Finance Minister Nitin Patel, who was dropped from Gujarat’s council of ministers in a rejig in September last year. The other members of the group are Maharashtra Deputy Chief Minister Ajit Pawar, West Bengal Finance Minister Chandrima Bhattacharya, Gujarat Finance Minister Kanubhai Patel, Goa Minister for Panchayat Raj Mauvin Godinho, Tamil Nadu Finance Minister Palanivel Thiaga Ragan, Uttar Pradesh Finance Minister Suresh Kumar Khanna and Telangana Finance Minister Thanneeru Harish Rao.

The committee is expected to deliberate on four issues related to casinos, race courses and online gaming in India. The mandate of the GoM is to examine the valuation of services provided by casinos, race courses and online gaming websites, along with taxability of certain transactions in a casino.

The group has to take into account the existing legal provisions and court orders on related matters. Naturally, the GoM will also make recommendations on possible changes in existing laws to implement the new valuing methods which will come into play regarding casinos, race courses and online gaming.Ahead of the meeting of the GoM in the national capital on May 2, Goa minister Mauvin Godinho said the GST Council will take a final call on the recommendations of the group. He added that several representations to the Council proposing that the four categories should be taxed as per gross gaming revenue will be examined by the group.

Online games involving betting attract a 28 per cent GST rate while games not involving betting or gambling are in the 18 per cent bracket.

The group, in its deliberations on May 2, will examine the administration of valuation provision and if an alternative methodology of valuation could be recommended. It will also evaluate impact on other similar services like lottery.

Earlier, the Group of Ministers on lottery, set up way back in January 2019, in its report had recommended that the rate and valuation issues of casinos, horse racing, online gaming and betting may be referred to Fitment/Law Committee, and then taken to the GST Council. It had proposed this can be done by either taking up the issue directly or letting a GoM approved by the Union Finance Minister whet the issue.

 The issue figured prominently in the 35th GST Council meeting on June 21 and the 37th Council meeting on September 20 in 2019.

The agenda for the June 21 meeting was included to discuss representation to define value for the purpose of taxation. The proposal involved a two-pronged discussion: for methodology and procedure for deciding face value and bet amount for determining tax to be referred to the Law Committee and the issue involving the tax level to be referred to Fitment Committee.

In the September 2019 meeting, the Fitment Committee considered a proposal for a reduction in wagering in horse racing from 28 per cent to 18 per cent, along with excluding prize money from the taxable value of horse racing.

Meanwhile, another GoM set up for rationalisation of GST rates is yet to finalise a report which will go to the GST Council for its final nod.

Though the GST Council is the final arbiter on crucial indirect tax regime, the call on revamping tax levels and reallocating commodities and services to new slabs is a political call to be taken by the Centre and states.

There are two crucial compulsions squeezing the Centre and states. First, rising inflation due to shooting petrol and diesel prices: this can be tackled by a reduction in taxes. Second, to ensure higher revenues as the five-year term of compensation for states incurring revenue losses since GST regime kicked in (July 2017), an upward rationalisation of taxes is necessary.

While the five-year window closes in July this year, states have been demanding an extension of the compensation cess as they are yet to reach the revenue neutral state since the adoption of GST as one tax for all India.

In November 2017, in a huge GST rejig , tax rates on over 200 items, ranging from chewing gum to chocolates, to beauty products, wigs and wrist watches, were cut to provide relief to consumers and businesses amid economic slowdown. In the 23rd GST Council meeting in Guwahati. headed by then finance minister Arun Jaitley, as many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent. The GST Council had pruned the list of items in the top 28 per cent Goods and Services Tax (GST) slab to just 50 from 228 at that time.

SOURCE:https://www.indiatoday.in/business/story/gst-council-gom-meeting-may-2-recommend-taxes-casinos-online-gaming-horse-racing-1943694-2022-04-30