Tag: GST

GST Amnesty scheme appeals applicable till Jan 31: Check eligibility, forms required

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a bid to assist taxpayers grappling with Goods and Services Tax (GST) issues, the Central Board of Indirect Taxes and Customs (CBIC) has introduced a significant amnesty scheme. This initiative allows specified GST taxpayers to lodge appeals against GST tax demand orders until January 31, 2024.

Announced as a measure to pardon delays in filing GST appeals, the special amnesty scheme aims to provide a lifeline for those who have disagreed with a GST tax demand order.

Individuals who fail to file their returns face fines in the form of late fees as a penalty. For delayed submission of the GSTR 3B, the late fee amounts to ₹50 per day. In scenarios involving State Goods and Services Tax (SGST) and Central Goods and Services Tax (CGST) with tax liabilities, the fine is ₹25 per day.

For instances with no tax liability in SGST or CGST, the late fee stands at ₹10 for each, totalling ₹20 per day. However, under the Amnesty scheme, there’s a possibility of relief from these penalties.

Special Amnesty Scheme announced for condoning delay in filing GST Appeal. The amnesty scheme is available till 31st January 2024. This is a golden opportunity for those taxpayers who might have missed the appeal deadline.#GSTforGrowth #EaseofDoingBusiness #ViksitBharat… pic.twitter.com/yYkhjgkQVv

— Ministry of Finance (@FinMinIndia) December 17, 2023

Who’s eligible to file this GST Amnesty scheme?

The eligibility criteria for filing an appeal against a GST tax demand order have been outlined by the CBIC in a notification titled ‘No. 53/2023- CENTRAL TAX,’ dated November 2, 2023. The specified taxpayers encompass:

• Individuals unable to appeal against the GST demand order issued by the GST proper officer on or before March 31, 2023.
• Cases where the earlier appeal against the GST demand order was dismissed solely due to exceeding the appeal deadline.

The amnesty scheme extends its benefits to GST demand orders issued on or before March 31, 2023, encompassing even those related to the financial year 2018-19.

How to file?

To avail of the amnesty scheme, individuals must file appeals against the GST tax demand order using GST Form APL-01.

“The appeal against the said order in FORM GST APL-01, as per subsection (1) of Section 107 of the said Act, should be submitted on or before the 31st day of January 2024,” stated CBIC in the notification.

This form stands as the sole requirement for filing appeals under the GST Amnesty Scheme.

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Parliament nod to raise cap on age of president, members of GSTAT

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Parliament passed a bill on Wednesday to raise the age cap of the president and members of the GST Appellate Tribunals to 70 years and 67 years, respectively.

Rajya Sabha returned the Central Goods and Services Tax (Second Amendment) Bill, 2023, to Lok Sabha without any changes, thus completing the parliamentary procedure for the bill. Lok Sabha cleared the bill on Tuesday.

Replying to a short discussion on the bill in Rajya Sabha, Finance Minister Nirmala Sitharaman said the amendment has been brought as suggested by the Chief Justice of India.

She said the finance ministry was “rightly alerted” and also advised by the Supreme Court of India’s Registrar on the suggestions of the Chief Justice of India that amendments to the legislation will have to be in alignment with regulations for other tribunals.

“Since it was a valid suggestion and pointed out by the Supreme Court, we quickly thought it was important for us to respond, and we responded in time. Therefore, we have come up with these two amendments,” Sitharaman said.

The bill, approved by Parliament, seeks to raise the cap on age for the president and members of the GST Appellate Tribunals (GSTAT) to 70 years and 67 years, respectively.

Currently, the age limit for the president is 67 years and for members is 65 years. The bill also aims to align the provisions of the Central GST Act in line with the Tribunal Reforms Act, 2021.

Among others, with the latest changes, an advocate with 10 years of ‘substantial experience’ in litigation in matters relating to indirect taxes in an appellate tribunal would be eligible to be appointed as a judicial member of the GSTAT. The minister also replied to queries and suggestions made by Rajya Sabha members during the discussion.

She said that before GST, people used to pay very high prices for daily-use commodities. But after the introduction of GST, prices of daily items like toothpaste, brush, and hair oil, have come down, the minister said.

Some members had suggested that petroleum products should be brought under the ambit of GST.

In response, the minister said, “I wish the state governments see the point and eventually customers will pay less tax if the GST is brought in, the overlapping and doubling of tax will not be there.”

The finance minister also sought to assure the House that the central government was responding speedily to the situation arising out of floods in four districts of Tamil Nadu.

“I assure the people of Tamil Nadu that Prime Minister Narendra Modi will be there whenever you need,” she said.

The minister also added that because of the speedy response of the home minister, the state got rescue helicopters, boats, medicines, and other assistance in time.

Participating in the discussion, Amar Patnaik (BJD) supported the bill but drew the attention of the government to the number of vacancies in different tribunals and asked to fill them quickly.

Sushil Kumar Modi (BJP) sought to highlight that fraudulent credit claims are becoming a huge challenge, as has been witnessed in the European Union, and suggested a simplified registration and return process for those traders who intend to buy and sell only within a state.

Masthan Rao Beeda (YSRCP) also supported the bill but called for simplification in the GST slabs, saying complexity was creating confusion, an increase in administrative burden, and potential errors.

BJP member Prakash Javadekar said 95% of the decisions by the GST Council have been taken unanimously in a transparent matter. BJP’s Arun Singh said the Modi government has brought administrative reforms in the country and has simplified the law and provisions.

M Thambidurai (AIADMK) also supported the bill. Sikander Kumar, Deepak Prakash, Dhananjay Bhimrao Mahadik, Naresh Bansal, Rakesh Sinha, and DP Vats of BJP also participated in the discussion.

Meanwhile, when the Upper House reassembled for the post-lunch session, a motion to elect one member to the Court of the University of Delhi was passed by voice vote.

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Lok Sabha passes bill to cap age of GSTAT President, members

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Lok Sabha on Tuesday passed two bills—one seeks to cap the age limit for GSTAT President and members, while the other to give immediate effect to the changes in customs and excise duties announced in the Budget.

With most of the opposition members under suspension from the Lok Sabha for unruly behaviour, the bills—the Central Goods and Services Tax (Second Amendment) Bill, 2023, and the Provisional Collection of Taxes Bill, 2023—piloted by Finance Minister Nirmala Sitharaman were passed by voice vote after a short debate.

The Central Goods and Services Tax (Second Amendment) Bill, 2023, seeks to cap the age for the president and members of the GST appellate tribunals (GSTAT) at 70 years and 67 years, respectively, higher than 67 years and 65 years specified earlier.

The Bill also aligns the provisions of the Central GST Act in line with the Tribunal Reforms Act, 2021. As per the bill, an advocate with 10 years of ‘substantial experience’ in litigation in matters relating to indirect taxes in the Appellate Tribunal would be eligible to be appointed as a judicial member of the GSTAT.

“Once the House passes the amendment bill, the process of selection of President and members of GSTAT would be initiated. CJI has already consented to chair the search and selection committee and has nominated senior judge Justice Sanjiv Khanna to chair the search cum selection committee for selection of judicial members and member technical (Centre),” Sitharaman said.

GSTAT will have one principal bench based in New Delhi, with a President and one judicial and technical member each.

The state benches of GSTAT will have a president, two judicial members, and two technical members (one each from the Centre and states). Setting up of state-level benches of GSTAT would help businesses by way of faster dispute resolution.

Currently, taxpayers aggrieved by the ruling of tax authorities are required to move to the respective high courts. The resolution process takes longer as the high courts are already burdened with a backlog of cases and do not have a specialised bench to deal with GST cases.

Sitharaman said taxpayers who are litigating against GST demands in various high courts or the Supreme Court will have the liberty to withdraw their cases and approach GSTAT once the benches start functioning.

In September, the Finance Ministry notified 31 benches of the GST Appellate Tribunal (GSTAT), which will be set up in 28 states and 8 UTs. As per the notification, Gujarat and UTs—Dadra and Nagar Haveli, and Daman and Diu—will have two benches of the GSTAT; Goa and Maharashtra together will have three benches.

Karnataka and Rajasthan will have two benches each, while Uttar Pradesh will have three benches. West Bengal, Sikkim, Andaman and Nicobar Islands; Tamil Nadu and Puducherry will together have two GSTAT benches each, while Kerala and Lakshadweep will have one bench each.

The seven northeastern states—Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura—will have one bench. All other states will have one bench of the GSTAT.

The Provisional Collection of Taxes Bill 2023, which was passed by the Lok Sabha, will give immediate effect to the changes in customs and excise duties announced in the Budget.

Moving the Bill for passage, Sitharaman said, the Bill seeks to obtain the authority from Parliament to provisionally levy and collect the newly imposed or increased duties of customs and excise for 75 days.

While the changes in rates of income and corporate taxes, incorporated in the Budget announced on February 1, are effective from April 1 or a notified date, most of the changes in customs and excise duty rates become effective from midnight.

This Bill proposes to replace the erstwhile Provisional Collection of Taxes Act, 1931 with a minor change that is technical in nature.

The provisions of the Bill empower collection provisionally, during the period between the introduction and enactment of the Bill the increased customs or central excise duty where such duty rate is increased beyond the statutory rate approved by Parliament or where such duty is newly imposed, she said.

The Bill provides for the “immediate effect for a limited period” of provisions in Bills relating to the imposition or increase of duties of customs or excise.

“particular Act, we are able to temporarily ensure, till the time the Finance Bill gets passed, no speculative activities are happening,” she said while introducing the Bill in Lok Sabha last week.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Big GST relief for MNCs where expats were working at Indian subsidiaries

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a major relief for multinational corporations (MNCs) having Indian subsidiaries who employ expats, the Central Board of Indirect Taxes and Customs (CBIC) issued a fresh circular citing that non-payment of GST on expat salary is an interpretation issue.

The circular, issued on December 13, said officials should not rush to issue tax evasion notices to Indian subsidiaries of MNCs on manpower deputed from abroad. In the circular, CBIC recognises that various salary arrangements are preferred by each company for expats and different tax implications should be considered on a case-to-case basis.

The circular picks reference to the Supreme Court’s judgment in the Northern Operating System (NOS) case, cautioning officers to look into the factual aspects before applying the ruling in all cases. “…The decision of the Supreme Court in the NOS judgment should not be applied mechanically in all the cases,” said the circular.

Supreme Court in 2022, while deciding the Northern Operating Systems case had held that secondment of employees of foreign principal companies to Indian subsidiaries would fall under “manpower supply” in the erstwhile service tax provisions. The apex court also took note of the fact that in the said case the salary expenses of expatriate employees were reimbursed to the foreign principal by the Indian subsidiary.

This ratio would equally apply under GST as well.

Also Read: Advance tax deadline is tomorrow: Who’s exempted from paying it?

Applying the ratio of the above judgement DGGI had initiated investigation in multiple cases involving GST of over ₹3,000 crore across India. BMW India, Mitsubishi Electric India, Metal One Corporation, Alstom Transport India, United Breweries, and Kanematsu India were some of the companies that received notices for 18% GST on expat salaries, among many others.

In a few cases, even where taxpayers have agreed with tax authorities and paid the tax, investigation by certain formations proposed to deny the input tax credit alleging wilful misstatement, fraud, etc leaving the taxpayers in a quandary.

The instructions issued by CBIC now clearly state that the ratio of the aforesaid decision cannot be applied universally to all cases of secondment and each case had to be investigated with reference to relevant facts.

This is significant from the taxpayer’s perspective as in the secondment model, there are differences in facts compared to the NOS ruling as payment is made to seconded employees in INR or reimbursement of expenses is restricted only to social security and not the full salary cost.

Experts feel that in such cases taxpayers could expect a fair appreciation of facts by the authorities in the light of the above instructions. Another welcome factor is the clarification to the effect that the provisions of section 74 shall not be invoked mechanically unless suppression, wilful misstatement, or fraud is involved.

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Experts see this circular as a big relief and well in time.

“This is a welcome clarification and a good step to avoid unnecessary litigation. Post NOS judgment plethora of Indian entities were at the receiving end of Show Cause Notices for alleged evasion of GST on secondment of overseas employees.

This clarification will help in filtering out those cases wherein the facts and circumstances of the agreement between an Indian firm and an overseas entity do not warrant GST liability. The department has been urged to use extended periods of limitation only in cases where evidence of fraud or wilful suppression of facts exists, thereby providing a welcome relief to honest taxpayers.

In cases where such evidence does exist, making it part of the show cause notice is in the interest of transparency. It is expected that at the field level, the tax department will consider this circular. Also, the existing SCNs already issued should be adjudicated based on this clarification,” said Anita Rastogi Indirect Tax Partner at PWC.

Expressing similar sentiments, Saurabh Agarwal, Tax Partner, EY, said, “This circular could bring much-needed relief to taxpayers, as it potentially allows full input tax credit on paid tax when section 74 proceedings are not initiated.

Nevertheless, the department recognises the existence of various types of secondment arrangements, highlighting the potential for different tax implications depending on the specific case. This suggests a nuanced approach from the department, where the Supreme Court’s judgment won’t be universally applied.”

Rajat Mohan, Senior Partner at AMRG & Associates, also added, “A much-anticipated clarification issued by CBIC regarding the intricacies of employee secondment by foreign entities to Indian firms and the associated tax implications. This clarification marks a significant advancement, arriving more than a year after the Supreme Court’s pronouncement.

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The directive places strong emphasis on the nuanced application of the Northern Operating System (NOS) judgment, cautioning against a blanket application in all scenarios. The Central Board of Indirect Taxes and Customs (CBIC) underscores the critical importance of conducting a meticulous assessment of the factual matrix, encompassing contractual terms, in every investigative process.

Additionally, the board provides clarification on the procedural aspects concerning the invocation of limitation under Section 74(1) by field formations. It unequivocally states that Section 74(1) should only be invoked when situations involve fraud, wilful misstatement, or the suppression of facts with the intent to evade tax.

Importantly, the Board categorically asserts that Section 74(1) cannot be invoked solely based on the non-payment of GST. While this clarification represents a commendable step forward, urging tax officers to approach secondment arrangements with due diligence and in adherence to legal principles, it is notable that the Board has deliberately refrained from offering specific illustrative cases. Litigation on this account is not expected to settle unless a clarification is issued on other related aspects of the eligibility of input tax credit, levy of interest, and penalty.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

GST Rate Roadmap — Rate rationalisation is key to future of GST

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Goods and Service Tax (GST) rate rationalisation process may start afresh after induction of new members in the GST Council. Sources infomed CNBC-TV18 that the Group of Ministers (GoM) on rate rationalisation is all set to meet and are waiting for government formation in five states.

“When it comes to the GST rate roadmap, rate rationalisation is key to the future of GST,” government sources said.

“Proposals suggested by the earlier GoM on rate rationalisation, under then Chief Minister of Karnataka BS Bommai, will too be looked at afresh as the council has reconstituted the GoM,” sources further added.

On November 1, the GST Council notified the reconstitution of GoM on rate rationalisation. As per the notification, the GoM will now be headed by Uttar Pradesh (UP) Finance Minister Suresh Khanna. The seven-member panel includes Finance Ministers from UP, Goa, Kerala, Karnataka, West Bengal, Rajasthan and Bihar.

“The proposals which will now be made by the new GoM will be the key to the future of GST,” sources revealed.

The Bommai panel had submitted an interim report in June 2022 and had sought more time from the GST Council on their recommendations on rates as the panel could not conclude discussions and reach consensus. At the two-day meeting in Chandigarh, the interim report had pitched for relook at exemptions, correcting the inverted duty structure and further deliberations on the rate structure.

On the other hand, growing GST collections have given a lot of confidence to the government.

“Healthy GST collections are providing a cushion to the government to meet economic requirements. The growth in GST collections is due to higher GDP, plateauing inflation, compliance improvement and formalisation of economy,” as per sources.

It remains to be seen how the developments unfold at the upcoming GST council meetings.

Also Read:India’s GST collection records 15% increase to ₹1.68 lakh crore in November

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GST officers detected ₹24,000 crore of suspected tax evasion: Finance Minister

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Finance Minister Nirmala Sitharaman on Tuesday said GST officers have detected 21,791 fake GST registrations and over ₹24,000 crore of suspected tax evasion during a two-month-long special drive.

In a written reply to a question in Rajya Sabha, the minister said to safeguard the interest of honest taxpayers and avoid extreme hardship to taxpayers, instructions have been issued from time to time, directing officers to exercise due caution and care in the exercise of powers such as summons, provisional attachment of property, blocking of tax credit etc.

“A total of 21,791 entities (11,392 entities pertaining to state tax jurisdiction and 10,399 entities pertaining to CBIC jurisdiction) having GST registration were discovered to be non-existent. An amount of ₹24,010 crore (state – ₹8,805 crore + Centre – ₹15,205 crore) of suspected tax evasion was detected during the special drive,” Sitharaman said.

The minister was replying to a question on the number of entities identified as having fake registrations, and the total amount of evasion detected during the special drive against fake GST registrations conducted by the Central Board of Indirect Taxes and Customs (CBIC) from May 16 to July 15, 2023.

To a query on whether the government has considered the challenges faced by e-commerce enterprises in obtaining GST registrations, especially operating in virtual spaces, Sitharaman said that considering the special nature of e-commerce operators, a simplified procedure for registration of e-commerce operators has already been notified.

It provides that when an e-commerce operator applies for registration in a particular state or Union Territory where he/she does not have a physical presence, he/she can apply for registration by giving details of the principal place of business located in another state or Union Territory.

Further, amendments have been made in GST Rules to strengthen the registration process, including biometric-based Aadhaar authentication, for high-risk registrants, along with the verification of the original copy of the documents.

A pilot project for this was launched in Gujarat. In July, the pilot project was extended to Puducherry and in November to Andhra Pradesh.

Also, details of bank account, name and PAN of the registered person are required to be furnished within 30 days of the grant of registration or before filing of the statement of outward supply, whichever is earlier.

Entities who do not furnish the details of valid bank accounts within the time period prescribed will be suspended automatically by the system. However, upon compliance with this provision subsequently, by the registered persons such system-based suspension would be automatically revoked by the system.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s GST collection records 15% increase to ₹1.68 lakh crore in November

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India registered 15 percent year-on-year (YoY) increase in its GST collections to ₹1,67,929 crore in November 2023, according to the latest data released on Friday (December 1). The collection is highest for any month during the FY2023-24 (till November).

As per the details put out by the government, out of total GST collected for November, CGST collected stands at ₹30,420 crore, SGST at ₹38,226 crore, IGST at ₹87,009 crore (including ₹39,198 crore collected on import of goods) and cess is ₹12,274 crore (including ₹ 1,036 crore collected on import of goods).

It is for the sixth time that the gross GST collection has crossed ₹1.60 lakh crore mark in FY 2023-24. 

“During the month, the revenues from domestic transactions (including import of services) are 20 percent higher than the revenues from these sources during the same month last year. It is for the sixth time that the gross GST collection has crossed Rs 1.60 lakh crore mark in FY 2023-24,” Finance Ministry said in a release.

Chart: Gross GST Collection during FY23-24 (Rs. crore)

In October 2023, GST numbers saw an YoY increase of 13%, making it the second highest-ever collection of ₹1.72 lakh crore. The breakdown of the GST revenue includes ₹30,062 crore in Central Goods and Services Tax (CGST), ₹38,171 crore in State Goods and Services Tax (SGST), ₹91,315 crore in Integrated Goods and Services Tax (IGST), and ₹12,456 crore in Cess.

Also Read:India’s GST collection records 13% increase to ₹1.72 lakh crore in October 

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West Bengal commercial taxes directorate unearths fake GST invoice rackets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Directorate of Commercial Taxes (State GST) of West Bengal has unearthed massive fake GST invoice rackets involving a turnover of Rs 4716 crore and arrested four key operators, officials said on Friday.

This is the first time in the history of the directorate since 1941 that arrests have been made directly under its Bureau of Investigation. Earlier, help from the police was taken for arrests, they said.

“The tax evasion involved in the two rackets was a staggering Rs 801 crore”, Directorate of Commercial Taxes Commissioner Khalid Anwar told PTI.

The total turnover involved in these two rackets amounts to Rs 4,716 crore, Additional Commissioner Sudeshna Mukhopadhyay said.

“A calibrated investigation since February has revealed that four operators created a network of 178 fake concerns in West Bengal, issuing fraudulent invoices to evade Rs 801 crore in government tax revenue,” Mukhopadhyay said.

She said two Deputy Commissioners Somasree Kar and Madhumita Kundu are the investigating officers who unearthed these rackets with the help of a team of about 25 officers of the Bureau of Investigation, South Bengal.

“They worked day and night to find out the entire trail. The investigation is still on,” Mukhopadhyay said.

The operators used to lure unsuspecting individuals with petty cash or promises of employment and fraudulently obtained their PAN, Aadhaar, and other identification documents. Using them, they incorporated several fake firms and obtained GST registrations.

“To further their fraudulent activities, the operators forged rent agreements, electricity bills, property tax certificates, and even signatures of premises owners and notaries. The entire racket was fueled by money laundering through both banking channels and cash transactions,” Mukhopadhyay said.

One of the arrested individuals is in judicial custody, while the other three have been granted bail with a directive to cooperate with the ongoing investigation.

“We are currently preparing a prosecution complaint (charge sheet) to be filed before the court. Further investigations are underway to identify and apprehend other individuals involved in this massive tax evasion scheme,” Anwar said.

The arrests and the ongoing investigation will serve as a deterrent to those involved in tax evasion and demonstrate the Directorate’s commitment to safeguard the government’s revenue, he said.

Also Read:Divi’s Laboratories gets GST demand notice of ₹164 crore

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Drug makers in India seek GST cut on essential medicines, say no one takes them as a “luxury”

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Pharmaceutical companies in India have sought a Goods and Services Tax (GST) cut on essential medicines to ensure their affordability for people at large.

Describing the pharma industry’s wishlist for the next Union Budget 2024, Director General of the Organization of Pharmaceutical Producers of India (OPPI), Anil Matai told CNBC-TV18 that import duty should also be waived off for life-saving drugs being imported, stating that no one takes medicines as a “luxury” and shouldn’t be made to pay high taxes for saving lives.

He also pitched for more incentives for innovation to drive more investment into R&D.

As per the Drugs (Prices Control) Order 2013, the government regulator National Pharmaceutical Pricing Authority (NPPA) regulates the prices of essential medicines in India. While 870 essential medicines are a part of the National List of Essential Medicines (NLEM), there was a price cap on 651 medicines in April 2023.

Terming the $200 billion size of the pharmaceutical industry as per the government’s target for 2030 as an “aspirational” ambition, Matai described it as achievable while he stressed the need for the government to address issues that can change in the regulatory environment by promoting the ease of doing business.

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Batting for innovation, he said so far the focus has been on incremental innovation, and for India to move up the value chain rather than just be a volume supplier, it will have to find ways for better IP (Intellectual Property) protection.

He stated that without any IP protection, a company coming up with any disruptive innovation will lack incentives to do so. He pointed out that a company ends up spending 15-20% of its revenue on R&D, and when a new drug is developed, 10 to 12 years are spent in pre-launch activities like drug development and safety trials out of the 20 years of patent life.

With a residual shelf life of 7 to 8 years for a patent, he explained that the government needs to factor in some ROI (Return on Investment) for a company investing billions of dollars in R&D as global companies operating in India need to make the proposition attractive to their global parent companies.

Speaking on the increased visibility of news of adverse events, including deaths, due to exported drugs, he said that such incidents bring to the limelight the need to have an improved quality enforcement environment in India.

Also Read: US pharma company Eli Lilly plans new 2 billion euro German plant

While he said there may be very few out of the 10,000 drug manufacturing units in India that don’t strictly adhere to quality standards, he called for strict action against such errant units.

Pitching for quality infrastructure at the government level in terms of drug inspectors, he reiterated that deaths of patients due to sub-standard drugs are unacceptable, and India’s image shouldn’t be allowed to take a beating.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Exclusive | Zomato, Swiggy receives GST demand notice

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In yet another case of missing links in the GST law causing tax troubles, this time the GST authorities seem to be spoiling the party for online food delivery platforms — Swiggy and Zomato. According to sources, both the companies have been issued a demand notice for non-payment of GST on the delivery fee collected by the platforms from consumers.

“Directorate General of GST Intelligence (DGGI) has issued a GST demand notice to Zomato & Swiggy after the Pune zone of DGGI initiated the investigation against Zomato & Swiggy on non-payment of GST on delivery fee charged from the consumers for the period between July2017-March 2023,” sources informed CNBC-TV18.

Sources added, “demand notice is a pre-show cause notice alleging non-payment of GST worth over ₹400 crore from Zomato and for Swiggy is around ₹350crore.”

Sources say that the view DGGI has taken on the matter is “Food delivery is a service, so Zomato & Swiggy are liable to pay GST on service at 18% rate.”

On the other hand, industry is of a view that “both Zomato & Swiggy are platforms, and they hire gig workers on a per delivery basis and Swiggy and Zomato are just collecting these fees as a total amount which gets paid to the gig worker. These gig workers are providing the service thus, it is on them to pay GST. But, since each gig worker is below the ₹20 Lakh threshold they are exempt from GST.”

Simply put, as of now, food delivery platforms have to pay 5% GST on their food orders (and not the restaurants). In addition to the food bill, they collect certain charges for delivery, which is passed onto the gig workers.

The contention is that delivery is a service provided directly by service delivery personnel to the customer and the platform is not required to collect GST on the same. In most cases, these delivery personnel would be below the GST threshold and hence not required to pay GST.

“The GST authorities are contending that food delivery platforms are required to pay GST on these charges,” shared a tax expert who did not wish to be quoted.

Experts say that the real question, therefore, is whether this service is by the platform or by the delivery personnel directly.

“It is understood that both the platforms — Swiggy and Zomato are likely to contest the demand as they are currently in talks with the GST Authorities explaining their point of view,” sources shared.

According to the industry, an ideal solution to deal with this issue for the Council would be to make a change saying that food platforms have to pay GST on these charges (just likely food bill) at 5%. This was in Council’s agenda earlier, but no decision was taken in this regard. The industry hopes that this change would be made prospectively.

CNBC-TV18 reached out to the food delivery companies for a reaction on this issue. Both Swiggy and Zomato are yet to share any comments.

Experts say that a clarity is much needed as a similar view has been taken by the authorities in many other cases, which is leading to confusion and litigation.

Saurabh Agarwal, Partner, EY says, “The taxation of delivery charges by food delivery platforms remains a source of ongoing debate. The platforms do not impose any GST on delivery charges, as they view them simply as the costs incurred by the riders who transport food orders to customers’ doorsteps and collect these costs from customers and transfer them to the riders. However, tax authorities regard these charges as part of the platforms’ revenue and insist on the collection of GST on them. The delivery charges may not be classified as revenue of the food delivery platform, as the riders are not employees of the platform but rather independent contractors and collect these charges on their behalf.”

“The application of GST on delivery charges would significantly affect the cash flow of the food delivery platform. Therefore, it is essential for the GST council to issue clear guidelines regarding the treatment of delivery charges, similar to the clarification they have provided regarding the inclusion of electricity charges,” he added.

Abhishek A Rastogi, founder of Rastogi Chambers, who is also arguing for similar nature of controversy for credit card industry said, “GST is applicable on a supply of service by the service provider, and when a person merely collects the consideration for another service provider, such a person may not become a service provider. This happens in several industries including the banking sector and hence the contractual arrangement is an essential ingredient to test whether the person will fall within the definition of the service provider.”

“The courts in several cases have gone into the concept of double taxation and directed for examination of the tax leakage. However, in the instant case, the exemption limits will kick in and perhaps there is no leakage of revenue,” he added.

MS Mani, Partner at Deloitte too feels, “it is essential to have a clarification on the applicability of GST on services provided by gig workers as the platforms only facilitate such services. Any clarification on the subject should be made effective on a prospective basis only.”

To watch out for is how Swiggy and Zomato react to the development and whether the matter gets presented in front of the judicial authorities to find a way out.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow