NDA3.0: GST reforms are unlikely to be impacted by the coalition administration. Reviewing tax officials' authority is possible

Experts believed that concerns over inflation may have caused certain important topics, such rate rationalization, to be neglected. But early consideration of matters like limiting the authority of tax officials may be given.

What do experts want the coalition administration to do about GST?

Legal experts who talked with Moneycontrol before of the Goods and Services Tax (GST) Council meeting on June 22 predicted that the planned GST amendments would probably go forward unopposed even with the coalition government in power.

But some important topics, like rationalizing rates, could be neglected, while others, like putting checks and balances on tax officials' authority, might regain attention.

"The general direction of GST reforms should remain unhindered even when using the new coalition government as GST reforms as a strategy has historically had support across party lines," said Sudipta Bhattacharjee, Partner, Khaitan and Co. But, bearing in mind "coalition dharma," certain reform elements, like checks and balances on tax officials' authority, may advance while potentially inflationary changes, like rationalizing the GST rate, would be shelved.

The controversial question of the GST officers' arresting powers is now awaiting a ruling from the Supreme Court. A number of petitions contested the constitutionality of sections 70(1) (i.e., the authority to call people to provide evidence and produce documents) and 69 (i.e., the authority to make arrests). A court presided over by Justice Sanjiv Khanna reserved decision on the case in May 2024.

The first meeting of the GST Council since the coalition government's creation at the Center is set for June 22. Additionally, this is the council's first meeting after the imposition of a 28% GST on the entire face value of wagers made on online gambling sites. Online gambling corporations are preparing for the council hearing.

The Telugu Desam Party (TDP) and the Janata Dal (United) forged a partnership to create the current NDA government at the Center after the BJP was unable to achieve a majority on its own due to a margin of less than thirty seats. This is expected to cause a change in the way the government approaches taxes and other fiscal issues.

According to Ankit Jain, a partner at the accounting firm Ved Jain and Associates, "it is understood that due to the coalition composition of the new Government, it may be possible that there may be an adjustment to the priorities of the Government."

What do experts expect from you?

It is anticipated that the next administration would prioritize increasing compliance. The Central GST Act will be modified to conform to the newly enacted GST regulations, according to Rohit Jain, managing partner of Singhania & Co.

Jain pointed out that these regulation changes would encourage tax inspectors to examine cases less closely. To improve the ease of conducting business, the government implemented a number of changes to the GST regulations in late 2023. To cut down on human intervention, the GST Network, for example, established a feature in October 2023 that allows the taxpayer to explain the variation in input tax credit available.

Question about online gaming:

"The opportunity exists for the coalition government to reevaluate the present cold war on online gaming, which includes an irrational 28 percent GST charge. Do they want to support a worthwhile sector that is only an expansion of the economy that is becoming more and more digitalized? "The government can reduce taxes on the industry, observe its growth, and benefit from its success," said Russell A. Stamets, a partner at Circle of Counsels.

The GST Council announced on October 1, 2023, that a 28 percent GST will be applied to the whole face value of wagers made online in gambling, with a six-month review period. The gambling sector has been requesting that the face value of bets be replaced with the total gaming income when calculating the 28 percent GST.

The GST Council's retroactive (with effect from the past) imposition of the tax dealt the gambling industry their heaviest blow. Furthermore, any online games involving bets played from August 2017 and October 1, 2023, regardless of skill or chance, were considered gambling and were subject to a 28 percent GST rate on the total amount of the bets made, according to the Council's view of retrospectivity.

71 showcause letters for suspected GST evasion of Rs 1.12 lakh crore in 2022–2023 and the first seven months of 2023–2024 (minus interest and penalty) have been sent to these online gaming enterprises as of December 2023. Given that the letters were sent out in accordance with section 74, which gives the government the authority to apply penalties of up to 100% of the tax demand, the total sum due, interest included, might exceed Rs 2.3 lakh crore.

Numerous applications have been filed challenging these notifications before the Supreme Court. The pleas will probably be heard by the court in July.

"The 28 per cent tax on online gaming has been problematic and is already impacting gaming startups," said Adarsh Somani, partner at Economic Laws Practice. Though the coalition administration cannot force change on its own, there was optimism since the GST Council had suggested a potential review after the elections.

Attorney Bhattacharjee, who is defending a few of the gaming businesses before the Supreme Court, pointed out that the new administration seemed hopeful about reversing the retroactive GST requests made against online gambling enterprises.