The Goods and Services Tax (GST) Council, led by Union Finance Minister Nirmala Sitharaman, recently made significant decisions regarding GST rates and corporate guarantees. These decisions are expected to impact various sectors of the Indian economy. Here’s a closer look at the key outcomes of the 52nd GST council meeting.
GST on Corporate Guarantees
The council clarified that corporate guarantees provided by companies to their subsidiaries will attract an 18% GST. However, no tax will be imposed on personal guarantees given by company directors while raising loans from the market. This decision aims to streamline taxation in cases involving corporate guarantees and personal guarantees.
In a move benefiting sugarcane farmers and manufacturers, the GST rate on molasses was reduced from 28% to 5%. This reduction is expected to facilitate quicker payment of dues to sugarcane farmers and reduce manufacturing costs for cattle feed, which is a significant development for the industry.
Taxation of Extra Neutral Alcohol (ENA)
The council made changes regarding Extra Neutral Alcohol (ENA), which is used both for human consumption and industrial purposes. ENA for human consumption will be exempt from GST, allowing states to continue levying Value Added Tax (VAT). ENA for industrial use will continue to be taxed at 18% under the GST.
The council introduced age limits for appointments to the GST Appellate Tribunal (GSTAT). The President of GSTAT will have a maximum age cap of 70 years, while members will be limited to 67 years. The minimum age for appointment will be 50 years. Additionally, advocates with up to 10 years of experience in litigation under indirect tax laws will be eligible for judicial membership in the tribunal.
Impact on Industries and Online Gaming Tax Clarification
While the council’s decision on corporate guarantees aims to provide tax clarity, tax experts have raised concerns about past transactions and their implications. Certain industries, such as power, petroleum, agriculture, and real estate, may be negatively affected by this decision.
The council clarified that a 28% tax on the full face value of online gaming applies to e-gaming, casinos, and horse racing. States like Delhi and Goa raised concerns about GST show-cause notices being sent to companies. The council affirmed that these liabilities were not retrospective but were applicable from the beginning.
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