The Goods and Services Tax (GST) Council recently convened after a hiatus of nearly five months to address several long-standing issues. From the constitution of Appellate Tribunals to tax treatment for the booming online gaming industry, the Council made significant decisions that have both positive and negative implications. In this blog post, we will delve into the outcomes of the meeting, highlighting the key decisions and their potential impact.
Resolving Appellate Tribunal Constitution
One of the crucial issues addressed by the GST Council was the establishment of Appellate Tribunals. With the clearance of appointment norms for tribunal members, the government has assured that the first set of tribunals will be operational within the next four to six months. While states have proposed the creation of 50 tribunal benches, they will be set up in a phased manner, starting with state capitals and cities housing High Court benches. This move brings hope for quicker resolution of mounting GST litigations that have burdened the court system.
Concerns for the Online Gaming Industry
However, the Council’s decision to finalize a 28% GST levy on the face value of bets placed in online games, casinos, or horse racing has raised significant concerns among businesses in the online gaming industry. Many stakeholders within the sector view this decision as a potential death knell for the growing industry and the thousands of jobs it supports. It is important to note that this decision was not taken hastily but was carefully considered by a ministerial group within the Council on multiple occasions since late 2020.
Balancing Tourism Revenue and Moral Considerations
In response to the outcry from the online gaming industry, Finance Minister Nirmala Sitharaman stated that the Council acknowledged the heavy reliance of Goa and Sikkim on casino-driven tourism revenues. However, the moral question of whether this industry should receive the same compassionate tax treatment as essential goods and services was also taken into account. With the Ministry of Electronics and Information Technology currently formulating a policy for online gaming, there is a possibility that this decision may undergo further review and fine-tuning as it requires an amendment to the GST law.
Tax Exemptions and Rate Adjustments
The GST Council also granted tax exemptions, reduced rates, and clarified inconsistencies in tax payments for certain items. For instance, food and beverages in cinema halls will now attract a lower 5% GST, along with unfried, uncooked snack pellets, fish soluble paste, and imitation zari yarn. It is perplexing why it took the Council six years after the launch of the GST regime to make these adjustments. Similarly, exemptions for imported drugs used in cancer treatment and rare diseases could have been implemented earlier, as could have been the intended higher tax levy on sport utility vehicles to discourage the use of larger personal vehicles in a country plagued by traffic congestion.
Conclusion
While the recent GST Council meeting made progress on various long-pending issues, there are both positive and negative outcomes to consider. The decisions related to Appellate Tribunals offer hope for quicker resolution of GST litigations, benefitting businesses and reducing the burden on the court system. However, the online gaming industry is deeply concerned about the finalized 28% GST levy, and further review and fine-tuning may be necessary to strike the right balance.
Additionally, the Council’s revisions to tax exemptions and rates, although beneficial in some cases, raise questions about the delay in implementing these changes since the inception of the GST regime. With no successor named to steer the ministerial group on rate restructuring, it remains to be seen how the promised overhaul of GST rates will be pursued.
As the GST Council moves forward, ongoing dialogue and collaboration among all stakeholders will be vital to ensure a fair and effective GST framework that promotes economic growth and addresses the needs of various industries.
