There was much expectation during the build-up to the latest meeting of the GST Council that there would be some finality to the brouhaha over the levy of GST on online gaming. It was recently clarified that the rate of GST would be 28 per cent on the full amount of the transaction with effect from October 1.
Gaming companies across the country have been receiving show-cause notices demanding a huge amount of tax — some of these demands date back to 2017. The taxpayers concluded that this was nothing but retrospective taxation.
It has now been clarified that the tax was always applicable on the full value of the bet, and that the show-cause notices only reminded gaming companies to pay up past dues.
Online gaming companies are now thinking of innovative measures to ensure that customers do not quit gaming because of the GST cost. Some of these companies are offering the value of the GST component as bonus vouchers that add to the kitty of the gamer.
Considering the multiple views on this topic, the decision of the Supreme Court is awaited for finality on the rate and the value on which gaming companies need to discharge their GST liabilities.
Guarantees
GST tax officers across the country started demanding tax on guarantees given by companies and their directors to other companies.
The GST Council clarified this issue by confirming that that when no consideration is paid by the company to the director in any form, directly or indirectly, for providing personal guarantee to the bank/ financial institutes on their behalf, the open market value of the said transaction/supply may be treated as zero and hence no tax to be payable in respect of such supply of services.
However, supply of corporate guarantees between related parties would attract GST of 1 per cent of the amount of such guarantee offered, or the actual consideration, whichever is higher. It is interesting that the GST Council has used the phrase “supply of a corporate guarantee” as against the normal business parlance of “providing a corporate guarantee”.
Almost every taxpayer is waiting for the GST Appellate Tribunal to be set up and start functioning at the earliest so that they can besiege them with appeals.
The GST Council has taken one more incremental step towards this by prescribing the technical criteria to be met for appointment as a judicial member of the Tribunal and age-limits for the president of the Tribunal and its members.
The Council has recommended providing an amnesty scheme through a special procedure for taxable persons who could not file an appeal under Section 107 of the said Act, against the demand order under Section 73 or 74 of CGST Act, 2017 passed on or before March 31, 2023, or whose appeal against the said order was rejected solely on the grounds that the said appeal was not filed within the time period specified in sub-section (1) of Section 107.
In all such cases, filing of appeal by the taxpayers will be allowed against such orders up to January 31, 2024, subject to the condition of payment of an amount of pre-deposit of 12.5 per cent of the tax under dispute, out of which at least 20 per cent (that is, 2.5 per cent of the tax under dispute) should be debited from Electronic Cash Ledger.
Taxpayers would welcome this relaxation since they can now file appeals even if they are bound to lose it at the Departmental level since the establishment of the GST Appellate Tribunals appears to only be a matter of time. As is their wont, the GST Council has tinkered with a few rates of GST on items such as millets taking into account representations received.
Another welcome announcement has been clarifying the rate of GST on job work of converting barley into malt as 5 per cent.
The writer is a chartered accountant