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Tag: Goods and Services Tax

  • Uber, Ola & Co. Demand GST Guidelines from Tax Authorities

    Ola, Uber, and Rapido are among the ride-hailing companies that will present a new set of arguments to the Central Board of Indirect Taxes and Customs (CBIC) regarding the controversial topic of whether the goods and services tax (GST) applies to services provided using the software as a service (SaaS) model.

    Instead of paying gig workers a commission, platforms that use the SaaS model charge them a set monthly price. According to a media report, businesses are anticipated to highlight any ambiguities resulting from the SaaS model’s uneven tax treatment in light of conflicting decisions made by the Karnataka Authority for Advance Ruling (AAR).

    They claimed that the Karnataka AAR’s ruling was skewing the industry’s competitive parity.

    Karnataka Govt Not Providing Same Level Playing Field

    The Karnataka AAR ruled that Uber and Rapido must pay the tax under the same scheme, even though it permitted ONDC-affiliated Namma Yatri to operate without imposing GST.

    While Uber has implemented this concept for three-wheeler ride-hailing, Rapido uses it for its auto-rickshaw and four-wheeler ride-hailing services. Earlier this month, Ola Consumer extended its subscription model, which it had initially used for autorickshaws, to include four-wheeler taxi services.

     According to a media report, some businesses have adopted a “no-tax position” regarding the subscription model, which results in inequity for players who pay taxes and charge commission.

    The ride-hailing industry is a price-sensitive one, and those that use a subscription model wind up offering riders substantially cheaper fares. This disadvantages some businesses in the marketplace.

    Subscription Model to Bypass GST

    As per a media report, the decision to introduce subscription-based plans, in which platforms charge driver partners on their platforms a set daily or weekly cost for an unlimited number of trips, may enable businesses to avoid paying the 5% GST that is applied to journeys that they facilitate.

    Section 9(5) of the Central GST Act, which requires e-commerce enterprises, including food delivery services, ride-hailing platforms, and online retailers, to collect and pay tax on behalf of service providers listed on their applications, applies the 5% GST. These consist of drivers, eateries, and online marketplace vendors.

    The new arguments follow a recent direction from the Karnataka High Court requesting that CBIC consult with interested parties and make clear its position on the issue.

    Due to uncertainty about whether a September 2023 advance tax ruling that held Namma Yatri need not collect and pay GST would also apply to other platforms, tax experts warned that companies using subscription models to avoid the 5% GST could potentially result in disputes between operators and tax authorities.

    However, the Karnataka AAR declared in July 2024 that Rapido had to pay GST for its taxi services, and in November of the same year, it declared that Uber would also be required to pay tax for services that were introduced under the subscription model.

  • GST Compliance Simplified: Key Updates and Strategies for the Upcoming Financial Year

    This article has been contributed by Cheruku Srikanth, Founder & CEO, Digital CFO.

    The Goods and Services Tax (GST), introduced on July 1, 2017, replaced multiple indirect taxes such as VAT, service tax, and excise duty. As a multi-stage, destination-based tax, GST has four slabs – 5%, 12%, 18%, and 28% – depending on the nature of goods and services.

    Over the years, GST collections have grown steadily, bringing fiscal stability, increased transparency, and a stronger tax base. With Budget 2025-26 introducing key amendments, GST compliance and revenue collection are expected to improve further. This article looks at the impact of rising GST collections, what drives compliance, and how simplification can encourage more businesses to participate.

    How Higher GST Collections Benefit the Economy

    A rise in GST collections directly impacts India’s fiscal and economic health. The benefits include:

    Higher Tax Revenue:

    More GST revenue allows the government to fund infrastructure, public services, and welfare programs while managing fiscal deficits.

    Economic Stability:

    A rise in collections signals higher consumption and production, reflecting a healthy business environment.

    Lower Fiscal Deficit:

    Steady revenues reduce the need for external borrowing, improving the country’s financial position.

    Better Infrastructure Spending:

    Increased revenues enable more investments in roads, railways, healthcare, and education, creating jobs and economic growth.

    More Businesses in the Formal Economy:

    GST has brought more enterprises under the tax net, improving compliance and financial planning.

    Easier Business Operations:

    Higher compliance reduces tax evasion and streamlines administration, making India more attractive for investment.

    Inflation Concerns:

    While GST revenue growth is positive, higher tax rates or compliance costs can push up prices, particularly affecting small businesses and essential goods.

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    What Drives GST Compliance and Higher Collection

    Several factors have contributed to better compliance and increased tax revenues:

    Technology Adoption:

    E-invoicing, automated tax filing, and AI-driven reconciliation tools have helped reduce evasion.

    Stronger Enforcement:

    Heavy penalties, late payment interest, and cancellation of GST registration ensure businesses comply.

    E-Way Bills and Invoice Matching:

    Tracking goods movement and matching invoices between buyers and sellers ensures that only genuine tax credits are claimed.

    Simplified Filing Process:

    The QRMP scheme (Quarterly Return Monthly Payment) has eased compliance for small businesses, while ERP software integration has streamlined tax returns.

    Increased Awareness:

    MSME outreach programs, tax workshops, and digital education have improved compliance levels.

    Economic Growth and Digital Transactions:

    The rise of e-commerce and digital payments has expanded the tax base, making evasion harder.

    Tax Rate Adjustments:

    Lower GST on essential goods encourages voluntary compliance.

    Government Incentives:

    Faster GST refunds, easier credit claims, and compliance-linked loan benefits motivate businesses to follow regulations.

    The Need for Simplified GST Compliance

    Despite improvements, GST compliance remains complicated for many businesses. Key challenges include:

    • Multiple tax slabs (5%, 12%, 18%, 28%) leading to confusion.
    • Frequent policy updates create regulatory uncertainty.
    • Input Tax Credit (ITC) mismatches cause compliance delays.
    • Multiple return filings (GSTR-1, GSTR-3B, GSTR-9) add to the workload.

    Simplifying GST processes will encourage more businesses to register and file returns correctly. Benefits include:

    • More voluntary compliance due to reduced complexity.
    • Fewer errors and tax penalties.
    • Easier ITC claims, improving cash flow.
    • Integration with ERP and automated tax filing systems to make compliance hassle-free.

    Budget 2025-26: Key GST Reforms

    The latest budget has introduced several changes to improve compliance and trade facilitation:

    ITC for Input Service Distributors (ISD):

    From April 1, 2025, ISD can distribute ITC on inter-state reverse charge transactions, helping businesses with centralised procurement.

    Clarity on SEZ and FTWZ Transactions:

    Goods stored in Special Economic Zones (SEZs) and Free Trade Warehousing Zones (FTWZs) will not be classified as supply, reducing tax disputes.

    GST Slab Restructuring:

    The government is working on simplifying tax slabs to reduce compliance costs for businesses, especially SMEs.

    Track and Trace Mechanism:

    A new Unique Identification Marking system will improve supply chain transparency, benefiting high-value industries.

    ITC for Immovable Property:

    A retrospective amendment allows businesses to claim ITC on property-related investments, including plant and machinery.

    Mandatory Pre-Deposit for Penalty Appeals:

    Businesses appealing GST penalties must pay a 10% pre-deposit, ensuring a more structured dispute resolution process.

    Return Filing Conditions:

    New regulations will set conditions for GST return filing, improving transparency and compliance.

    Conclusion

    GST has played a key role in improving tax compliance and formalising India’s economy. While progress has been made, issues like complex return filing and ITC mismatches still need attention. The reforms announced in Budget 2025-26 aim to simplify compliance, reduce business burdens, and create a more efficient tax system.

    With increasing digitisation and AI-driven tax compliance tools, automation will play a critical role in improving collections and making GST compliance easier. As policies evolve, India is set to create a more business-friendly GST framework that balances revenue growth with economic ease.

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  • The Centre Designates GST Officer to Block Websites Run by Online Gaming Companies that are Evading Taxes

    The Directorate General of GST Intelligence Headquarter (DGGI-HQ) has been given authority by the Indian government to direct intermediaries to disable the websites of online gaming enterprises accused of tax evasion. The government has designated the Additional/Joint Director (Intelligence) as the nodal officer for the assignment, according to a notice published in the Ministry of Finance’s gazette.

    Section 14A(3) of the Integrated Goods and Services Tax Act, 2017 gives the DGGI-HQ the authority to block any “information generated, transmitted, received, or hosted in any computer resource” that an online gaming company that has not paid taxes has used. This covers businesses based outside of India.

    Clause (b) of sub-section (3) of section 79 of the Information Technology Act, which imposes liability on intermediaries for failing to block or remove content upon government orders, is also cited in the notification. The material Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules’ clause (d) of subrule (1), which forbids intermediaries from keeping illegal material, is also included.

    The government’s intention is to thwart tax-evading foreign gambling platforms by instructing intermediaries, such as search engines and social media platforms, to halt their online operations in India, according to the gazette notification.

    Sector Evaded Taxes Worth INR 81,875 Crore in FY24

    Earlier this year, the DGGI declared that the largest amount of GST evasion in the fiscal year 2023–2024 was caused by the online real money gaming industry. In FY24, the sector avoided paying taxes totalling INR 81,875 crore in 78 cases. The distinction between “real money online gaming” and gambling was effectively eliminated when the government raised the GST on real money online gaming from 18% to 28% earlier in 2023.

    Numerous businesses received extensive tax evasion warnings dating back to prior fiscal years when the legislation went into effect on October 1, 2023. According to reports, Delta Corp received a notice of INR 16,822 crore for the period of July 2017 to March 2022, while Dream Sports received claims ranging from INR 25,000 to INR 40,000 crore.

    Finance Minister Nirmala Sitharaman later disclosed that within six months of the raise, tax receipts from the sector had increased fivefold. From October 2023 to March 2024, collections increased 412% to INR 6,909 crore from INR 1,349 crore.

    Government Under Strong Criticism

    The industry protested the tax hike, which was a highly contentious move. In a letter to the government, more than 100 skill-gaming businesses claimed that it would “reverse the growth trajectory of the industry.” According to the letter, the GST will incentivise offshore gambling operators, attract Indian customers to them, and ultimately result in neither the expansion of the legal industry nor the best possible revenue collection.

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  • Businesses’ Taxes on Used, Outdated EV Vehicles are Increased by the GST Council

    On December 21, Finance Minister (FM) Nirmala Sitharaman made it clear that the 5% goods and services tax (GST) rate will remain applied to new electric cars (EVs). However, the FM also stated that used EV sales between private parties will continue to be GST-exempt. FM While speaking to the media after the 55th GST Council meeting in Jaisalmer, Rajasthan, Sitharaman made the remarks. She also mentioned that outdated EVs that are purchased by businesses (or modified by sellers) and subsequently sold will be subject to an 18% tax. The difference between the purchase and sale prices will be subject to the GST rate. At the moment, new EVs are subject to a 5% GST tax, while used and aged EVs are subject to a 12% tax.

    The market for old cars has expanded dramatically in recent years. In 2023–2024, the industry is expected to have sold more than 5 million units. Better financing alternatives and the emergence of certified pre-owned programs from OEMs such as Maruti Suzuki’s True Value, Mahindra & Mahindra’s First Choice, and Volkswagen certified pre-owned, as well as online startups like Spinny and Cars24, helped propel this market’s growth.

    Decision Taken After a Discussion Among Council Members

    The decision to impose 18% GST on used EVs was not decided arbitrarily, FM Sitharaman told the media, adding that the GST Council members had extensive deliberations before reaching a final decision. However, stating that more research was necessary, the Council postponed making a decision on the tax rates for food delivery services like Swiggy and Zomato. Foodtech giants seem to have been negatively impacted by the delay, as recent reports suggested that the Fitment Panel was considering reducing the tax levy on food delivery charges from 18% to 5%. Whether the tax should be applied to the meal item or the delivery service, and whether the rate should be 5% or 18%, were the main topics of discussion within the GST Council, according to reports. Nevertheless, no agreement was made, which resulted in the postponement.

    Clarity on Payment Aggregators

    The GST Council clarified payment aggregators as well, declaring that aggregator-processed transactions under INR 2,000 would not be subject to GST. Fintech businesses and payment gateways that don’t settle money, however, won’t be covered by the exemption. Notably, this comes after rumours circulated that the Council was considering charging payment aggregators 18% to facilitate low-value online transactions. According to the aforementioned plan, aggregators would have been charged 18% GST for handling debit and credit card transactions up to INR 2,000. In order to await feedback from the Insurance Regulatory and Development Authority of India (IRDAI), the Council also postponed discussions on health insurance changes.

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  • GST Council Provides Resolutions to Various On-Going Issues

    Several important topics were discussed at the 54th Goods and Services Tax (GST) Council meeting, including online payment processing, the use of helicopters for religious reasons, and the taxation of R&D in educational institutions. In August 2024, India’s Goods and Services Tax (GST) receipts were INR 1.75 lakh crore, down from INR 1.82 lakh crore the month before.

    Digital payments, insurance, and education are just a few of the areas that could be affected by the several recommendations that the Council considered, even though the overall rise of GST was relatively constant at about 10%, showing resilience in domestic revenue collection. The government’s cautious approach to tax reforms was signaled when these suggestions were forwarded to the fitment committee for additional examination.

    Growing Domestic Revenue and GST Patterns

    GST receipts in India increased by 10.1% to INR 9.14 lakh crore in the first half of the fiscal year. There was a 9.2% increase to INR 1.25 lakh crore in domestic revenue, and an even quicker growth of 12.1% to INR 49,976 crore in revenue from imports. Despite a reduced rate of growth in net domestic revenues (4.9 percent after refunds), this expansion exemplifies the economy’s continuous recovery.

    Notably, overall net GST revenue stood at INR 1.5 lakh crore, representing a 6.5 percent increase compared to the same month last year. Integrated Goods and Services Tax (IGST) revenues recorded a greater gain of 11.2 percent. A further important factor was the distribution of refunds, which totaled INR 24,460 crore (58% of which went to domestic refunds and the rest to exporters).

    The insurance sector plays a significant part in India’s tax system; in 2023-24, the federal government and individual states collected INR 8,262.94 crore from health insurance premiums and INR 1,484.36 crore from reinsurance premiums.

    Helicopter Services Subject to Lower GST Rates

    The GST Council eased the financial burden on tourists and pilgrims by lowering the tax on religious helicopter services from 18% to 5%. Devotees who use helicopter services for pilgrimages to religious locations around India are expected to feel less financial strain as a result of this action.

    In areas where pilgrimage sites are difficult to reach, this GST cut will make helicopter services more cheap, encouraging more people to travel there for religious purposes.

    Market Behaviour and Insurance Rates

    Discussions regarding the Goods and Services Tax (GST) on health and reinsurance premiums have also centered on the insurance industry. Health insurance premiums generated INR 8,262.94 crore for the government as of August 2024. Nevertheless, the insurance sector’s taxation has not been changed in any significant way.

    Following the meeting of the GST Council, the stock market responded to the premium uncertainty by trading down in the shares of Star Health, ICICI Lombard General Insurance, and Go Digit General Insurance. These businesses could feel the effects of the upcoming health insurance pricing decision, which has already dampened investor enthusiasm.

    Examining Research and Development Efforts

    Given the notices received by DGGI to universities regarding research funds, the fitment committee will conduct an additional evaluation of the subject of GST on R&D operations in educational institutions. Some universities, like Punjab University and IIT Delhi, have received notifications regarding research funding worth INR 220 crore; they are now seeking for clarification regarding the treatment of these grants under GST.

    Institutions of higher learning that depend on research funding are particularly affected by the decision about the GST applicability to these awards. The academic sector may need to consider the recommendations of the fitment committee in the long run.

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  • Foodtech Giant Zomato Gets Yet Another Demand Notice

    Zomato, a food-tech giant, has received a tax demand and penalty order totaling over INR 3.5 lakh, adding to the flood of goods and services tax (GST) warnings it has already been receiving.

    On August 31st, Zomato announced in an exchange filing that the Sales Tax Officer of Delhi’s Ward 300 had issued an adjudication order, increasing the GST demand to INR 1.89 Lakh plus interest of INR 1.59 Lakh and any applicable penalty, the amount of which was not specified. The company headed by Deepinder Goyal claimed that it received the GST notification “disputing the eligibility of the input tax credit and interest penalty thereon.”

    The filing indicated that the GST demand notice was issued for the period beginning in April 2019 and ending in March 2020.              

    The Second Notice in a Week

    Zomato has been hit with a demand and penalty order for the Goods and Services Tax (GST) for the second time this week. GST notices for around INR 4.59 crore were received by the company on 29 August 2024 from the authorities in Tamil Nadu and West Bengal. Zomato has stated that it intends to proceed with an appeal against the most recent tax demand order, even though it previously stated that it would file an appeal against the previous tax demand orders before the applicable judicial body.

    The company stated in response to the most recent demand notice that “despite the fact that the company believes that it has a strong case on merits, the company shall pay the applicable amounts to the GST authorities.” This was in reference to the amount involved and the cost of litigation.

    Zomato is now dealing with several tax concerns, which is an important fact to keep in mind. An INR 9.45 crore GST notice was sent to the food-tech major by the Assistant Commissioner of Commercial Taxes (Audit) in Karnataka. This notice was received by the company as of the previous month.

    The Gurugram Goods and Services Tax (GST) authority issued a tax demand and penalty notice for INR 11.8 crore to the food delivery company in April, before that. These changes take place at a time when Zomato’s stock is increasing as a result of the company’s growing financial performance. The company’s net profit went from INR 2 crore in the previous year’s quarter to INR 253 crore in the first quarter of FY25. The value of Zomato’s stock has increased by about 102% so far this year.

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