GST Council likely to mull on online gaming, reduce tax on fertiliser

The GST Council, in its meeting on Saturday, is likely to deliberate on various issues, including taxation on online gaming and the Parliamentary standing committee's recommendation for lowering tax on fertiliser, according to sources.

The 53rd meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising her state counterparts, is also likely to discuss the progress of the Group of Ministers (GoM) on finalising the report on Goods and Service Tax (GST) rate rationalisation and amendments to GST laws based on previous decisions of the council.

The council may also discuss the recommendations made by the Standing Committee on Chemicals and Fertilisers in February to reduce GST on nutrients and raw materials in the interest of fertiliser manufacturing companies and farmers.

Currently, GST at a 5 per cent rate is charged on fertilisers, while raw materials like Sulphuric Acid and Ammonia face a higher GST at 18 per cent.

The issue of further reduce tax on fertilisers was placed before the GST council in its 45th and 47th meetings held in September 2021 and June 2022, though the council did not recommend any change in rates.

Saturday's Council meeting will be held after a gap of eight months. The 52nd GST Council meeting took place on October 7, 2023.

With regard to the online gaming sector, the council is likely to review the decision to levy 28 per cent GST on the full value of bets for online gaming companies, which came into effect on October 1, 2023.

In its meetings in July and August, the GST Council had approved amendments to the law to include online gaming, casinos and horse racing as taxable actionable claims, and clarified that such supplies would attract a 28 per cent tax on full bet value.

At that time, it was said that a review of the implementation would be carried out after six months.

The GST Council is likely to review the decision to levy 28 per cent GST on the full value of bets for online gaming companies that came into effect on October 1, 2023.

Following the council decision, over 70 show cause notices have been issued to online gaming companies for alleged GST evasion of over Rs 1.12 lakh crore during financial years 2022-23 and 2023-24.

Many of them have gone to court against the notices and the cases are pending.

Sources said the GST Council is likely to discuss the legality of the show cause notices served to online gaming companies and the way forward.

With regard to corporate guarantees, the council is also likely to review its last meeting decision to levy 18 per cent GST on guarantees provided by corporates to their subsidiaries.

The CBIC circular on corporate guarantee was stayed by the Punjab and Haryana High Court and a review of the legal aspect of the circular is likely to be taken up at the meeting on Saturday.

Also, the GST council may set a timeframe for the GoM on rate rationalisation to submit a report. The GoM has been reconstituted twice in the last one year and now is headed by Bihar Deputy Chief Minister Samrat Chaudhary.

The council is also likely to vet the amendments in the GST law with respect to a decision taken in the previous meeting in October last year.

The council had decided to give up the right to tax Extra Neutral Alcohol or ENA (raw product for making alcohol for human consumption) to states.

Accordingly, ENA used for human consumption will be exempt from Goods and Services Tax (GST), and states can continue to levy VAT. ENA for industrial use will continue to be taxed at 18 per cent under the GST.

To bring about this change, an amendment is required in the GST law.

Sources also said the GST Council is likely to clarify that telecom companies will have to pay GST, along with the instalments paid towards spectrum charges.

The clarification should end confusion among field formations regarding the method for collection of GST in the spectrum auction process.

Currently, the GST regime has five broad tax slabs of zero, 5, 12, 18, and 28 per cent. A cess is levied over and above the highest 28 per cent rate on luxury and demerit goods.