With barely days left for the June 22 GST council meet, and no agenda decided yet. It is expected that state finance ministers might provide suggestions on indirect taxes, which might be included in the upcoming union budget.
Moreover, with GST revenue showing a notable increase, the industry is closely following discussions on the revival of a plan to restructure the complex multiple-rate tax system at council meet.
Further, the industry is also expecting review on 28 per cent levy on online games, horse racing and casinos.
According to the experts, GST council meeting might focus on the resolution of inverted duty structure, which continues to affect various sectors like textiles, footwear, and fertilisers.
As, this structure is imposing a cash flow challenge on businesses, thus leading to the accumulation of Input Tax Credit (ITC), which remains underutilized due to complexities and disputes surrounding refunds related to the inverted duty structure (IDS).
What Businesses Expect Out of This Meeting?
Speaking about upcoming GST council, executive partner of Lakshmikumaran & Sridharan Attorneys Shivam Mehta said,
‘The entire industry is counting on the new coalition Government for relief owing to the hardships faced post the introduction of new rule for valuation of corporate guarantee. The industry is hoping for an amendment/clarification to fix the value of supply basis, the actual loan amount disbursed and the non-applicability of the rule where full ITC is available to recipients. As hinted by the finance minister recently, spirited discussions regarding inclusion of petrol, diesel, ATF, natural gas, and selected petroleum products within the ambit of GST have been taking place not just within the corridors of power but also within the industry. How far these requests will be met, however, will depend on the Centre taking on board the states.’
Meanwhile, the council had started the discussions on ‘perspective plan,’ which will involve imposition of cess or surcharge on top of GST levies after March 2026. To further talk about this issue, the council might discuss replacement levy for the cess and how it can be used.
According to Tax Partner Saurabh Agarwal, businesses are also demanding GST council, to implement an amnesty scheme to resolve tax disputes stemming from the Goods and Services Tax (GST) rollout. Delays in initiating this scheme are contributing to a backlog of legal disputes.
Besides Tax reform, the business are also asking for rationalization of rates. Speaking about this issue, Smita Singh-the partner of S&A Law Offices said,
‘The next issue is a persistent demand for rationalization of rates. There is a huge expectation in the industry of an overhaul of the existing four-tiered GST rate structure of 5 per cent, 12 per cent, 18 per cent and 28 per cent during the current financial year’
In addition, the industry is also urging review on various issues like the taxation of ESOPs, corporate guarantees, and various rate-related matters due to a rise in recent litigations concerning these issues.
Additionally, the businesses are also anticipating new regulations on Input Service Distribution (ISD) and its implementation timeline.