Expectation Inputs on 55th GST Council Meeting by Shivashish Karnani, GST Division, DPNC Global
Below the Expectation Inputs on 55th GST Council Meeting by Shivashish Karnani, GST Division, DPNC Global
1. GST Scrutiny of Food Delivery Platforms
* The Directorate General of GST Intelligence (DGGI) is closely monitoring food delivery giants over the 18% GST levied on delivery charges collected from customers. These platforms have previously received notices demanding Rs 500 crore each in GST dues on the total delivery charges collected. The companies involved argued that they do not directly provide delivery services but facilitate them through independent delivery partners, most of whom fall below the GST registration threshold of Rs 20 lakh annual income. The council is expected to address these concerns of this sector.
* Key issues on the agenda:
1. Review of Delivery Charges: The GST Fitment Committee is currently reviewing how delivery charges by food delivery apps should be classified under GST.
The Directorate General of GST Intelligence (DGGI) has raised concerns that these charges should be included as part of the food supply, which would subject them to a higher GST rate of 18%.
2. Financial Implications: Zomato and Swiggy have received GST demand notices amounting to approximately Rs. 400 crore and Rs. 350 crore, respectively, for the period from July 2017 to March 2023. This has sparked a debate on the classification of these delivery charges and their impact on consumers and businesses.
3. Potential Policy Changes: While the Fitment Committee cannot directly overturn DGGI's notices, it is expected to advise on policy changes that could lead to a more consistent tax framework. The discussions at the upcoming meeting may provide clarity on this matter
2. GST on Trademark Usage by Franchise Outlets* In a related matter, the DGGI has issued notices to several Food and Beverage companies over GST payments for trademark usage by franchise outlets operating outside their head offices' registered state. Tax authorities contend that the use of a brand by a franchise in a different state constitutes a service provided by the head office. This interpretation, however, has raised concerns within the industry about increased compliance burdens for businesses operating across multiple states, especially for those unable to claim Input Tax Credit (ITC). The food and beverage sector expects the GST Council to address these issues in the upcoming meeting. The outcomes of the 55th GST Council meeting will be closely watched, as they hold the potential to impact not only individual taxpayers but also key sectors of the Indian economy.
Media talk points:
* The continuation of 18% GST on insurance premiums exceeding Rs 5 lakh is likely to be debated, with concerns raised about the impact on middle-class families and those with specialized medical needs. Apart from that, there may be discussions on the expected increase in GST for luxury goods, examining how this could affect consumer behavior and luxury markets.
* Media might explore how the proposed changes aim to balance the government's revenue requirements with welfare considerations, particularly the expectation of lowering GST on essentials while raising it for luxury items.
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