Jaisalmer:

The goods and services tax council on Saturday decided to levy an 18 per cent GST on margin value on the sale of used electric vehicles by businesses and agreed to keep jet fuel (ATF) out of the ‘one-nation-one-tax’ regime.

The GST Council in its 55th meeting also decided to clarify on taxability of popcorn, saying caramelised popcorn will continue to attract tax at the rate of 18 per cent. However, pre-packed and spiced popcorn will attract 12 per cent, while 5 per cent will be levied on unpacked and unlabelled ones.

It has been decided to regularise the issues for the past on “as is where is” basis… “It is a clarification being recommended by the GST Council to settle the disputes arising out of interpretation,” an official statement said.

The panel, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states and UTs, deferred decisions on reducing tax rate on insurance products as also on levy of the tax on food delivery by aap-based platforms.

The panel cut the tax rate on fortified rice kernels used for public distribution to 5 per cent from 18 per cent, Sitharaman told reporters after the meeting of the Council here.

The Council also decided that no GST will be payable on penal charges levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.

The panel deferred a decision on reducing the rate of tax on insurance premium, pending comments of the sector regulator, she said.

A group of ministers examining the issue had recommended exempting insurance premiums paid for term life insurance policies from GST and premium paid by senior citizens for health insurance cover. It had also suggested GST exemption on premium paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh.

Alongside, the GoM on rate rationalisation, which is looking at tweaking rates on 148 items, will be given more time to arrive at a decision.

The finance minister said the council decided to raise the rate of tax to 18 per cent from 12 per cent on all used EV sales, just as in case of non-electric vehicles, and it will be applicable only on the value that represents margin – the difference between the purchase price and selling price (depreciated value if depreciation is claimed) – by businesses.

Sale and purchase of used vehicles by individuals will continue to be exempt from GST.

Without naming any state, she said the states wanted to continue to keep aviation turbine fuel (ATF), used in aircrafts, out of the goods and services tax (GST).

When the GST subsumed more than a dozen central and state levies into GST in July 2017, five products – crude oil, petrol, diesel, ATF and natural gas – were kept out of its purview. The central government levies excise duty on them and states levy VAT.

“Every state clearly said that ATF should not come into GST… States did not feel comfortable” to include ATF under the GST, she said.

She said black pepper and raisins when supplied by an agriculturalist is not liable to GST payment.

GoM on health insurance requires more work, she said, adding the same was the case with rate rationalisation GoM.

“No report (on rate rationalisation) has been finalised,” she said.

The GoM on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, has been given an extended deadline to submit its report. The earlier deadline was December 31, 2024.

On small companies facing registration problems, she said a concept note has received in-principle approvals. This may require amendments to be made to the GST Acts to make it easier for small companies to register.

The Council also decided to set up a Group of Ministers to mull over allowing states to levy cess under GST to overcome financial distress after natural calamities.

Finance ministers of Uttar Pradesh, Telangana and West Bengal would be part of the GoM.

The Council decided to form the GoM after Andhra Pradesh sought Council’s approval to levy 1 per cent cess to overcome financial distress post flood in the state.

No decision was taken on levy of tax on delivery charges by quick commerce and food delivery platforms. “This has been deferred,” she said, adding the Fitment Committee will again review it and the issue being debated is if the tax should be equivalent to 5 per cent GST levied on food or more. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

The GoM on GST rate rationalisation on Monday decided to hike tax on sin goods like aerated beverages, cigarettes, tobacco and related products to 35 per cent from the present 28 per cent, an official said.

The Group of Ministers (GoM) on rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary also decided to rationalise tax rates on apparel.

As per the decision, readymade garments costing up to Rs 1,500 would attract 5 per cent GST, those between Rs 1,500 and Rs 10,000 would attract 18 per cent. Garments costing above Rs 10,000 would attract 28 per cent tax.

In total, the GoM on rate rationalisation will propose tax rate tweaks on 148 items to the GST Council. “The net revenue impact will be positive,” an official said.

The GoM report is expected to be discussed by the GST Council — chaired by Union Finance Minister and comprising her state counterparts — on December 21. A final decision on GST rate changes will be taken by the council.

“The GoM has agreed to propose a special rate of 35 per cent on tobacco and related products and aerated beverages. The four-tier tax slab of 5, 12, 18, and 28 per cent will continue and a new rate of 35 per cent is proposed by the GoM,” said the official.

Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28 per cent.

Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury goods like car, washing machine, and demerit goods like aerated water and tobacco products attract cess on top of the highest 28 per cent slab.

The official said the GoM on rate rationalisation has finalised its report on Monday to be presented before the council.

The council will now decide whether there is further scope for rate rationalisation and may decide to retain the GoM so that the rationalisation exercise continues periodically, the official added.

In its last meeting in October, the GoM had proposed reducing GST on packaged drinking water of 20 litres and above to 5 per cent from 18 per cent.

It had also decided to propose to the council to reduce GST on bicycles costing less than Rs 10,000 to 5 per cent, from 12 per cent.

Also, GST on exercise notebooks would be reduced to 5 per cent from 12 per cent. The GoM also proposed hiking GST on shoes above Rs 15,000/pair from 18 per cent to 28 per cent.

It also proposed hiking GST on wrist watches above Rs 25,000 from 18 per cent to 28 per cent in the previous meeting on October 19.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Union Minister of State for Finance Pankaj Chaudhary. File.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council has set up a 10-member GoM, chaired by Minister of State for Finance Pankaj Chaudhary, to decide on the taxation of luxury, sin and demerit goods once the compensation cess ends in March 2026.

The Group of Ministers (GoM), which includes members from Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal, will submit its report to the Council by December 31.

In the GST regime, compensation cess at varied rates is levied on luxury, sin and demerit goods over and above the 28% tax. The proceeds from the cess, which was originally planned for five years after GST roll-out or till June 2022, were used to compensate States for revenue loss incurred by them post the introduction of GST.

In 2022, the Council decided to extend the levy till March 2026 to repay the interest and the principle amount of the ₹2.69 lakh crore worth loan taken in the 2021 and 2022 fiscal years to make good states’ revenue loss during Covid years.

With just one-and-a-half year remaining for the cess to end, the GST Council in its 54th meeting on September 9 decided to set up a GoM to decide the future course of the cess.

“The Terms of Reference of the GoM is to make taxation proposal to replace compensation cess after its abolition,” the GST Council Secretariat said in an office memorandum.

The task before the GoM is quite critical as it would have to suggest whether the levy would continue as cess or additional tax. If it is called cess, then like any other cess under tax laws, the collection would go to the Centre.

If the GoM decides not to levy cess but impose additional taxes on luxury, sin and demerit goods, then it has to suggest what would be the rates, how many new slabs would be required and what are the legislative amendments that would be required.

Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28%. However, as per GST law, tax of up to 40% can be imposed on goods and services.

As per the calculations, the interest and principal of the ₹2.69 lakh crore loan would be repaid by January 2026. The collection from the compensation cess in February and March, 2026 is estimated to be ₹40,000 crore.

The GST law provides that any additional amount collected in the compensation cess pool would be divided equally between the Centre and states.

The GST Council would also have to decide whether it would continue with the compensation cess till March 2026 or end it by January 2026 or as and when the loan is repaid and bring in the new taxation proposal as per the suggestions of the GoM on GST compensation cess.

Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs in a conversation with The Hindu in Chennai on September 21, 2024
| Photo Credit: Dinesh Krishnan

Union Finance Minister Nirmala Sitharaman on Saturday (September 21, 2024) said the Goods and Services Tax (GST) Council is looking at the GST rates, item by item, for rationalisation and the process was being discussed for a long time and delayed due to several factors including the impact of COVID-19.

In an interaction with senior journalists of The Hindu Group of Publications at The Hindu’s head office in Chennai, Ms. Sitharaman, while responding to a question on rationalisation of GST, said: “It has been delayed for a long time and it’s much overdue due to various factors including the impact of COVID-19, election in some States. Now there is the seriousness, saying we need to take this up. The committee [Group of Ministers committee on rate rationalisation] is looking into it item by item.”

On a question related to GST compensation and compensation cess, she said “Everyone knows that the GST compensation cannot continue after June 30, 2022, and that is by law. So paying off the compensation in the first five years after implementation of the GST continued and ended in June 2022. The cess continues to be collected. Whether it has to continue or not and the rate and items on which the cess should be levied is being discussed in the GST Council.”

According to her, “There are some States that want the GST compensation to continue. But, it cannot continue in the very spirit of how it was brought in. It was introduced to make sure that States don’t have any apprehensions about their revenue resources coming down to a drastically low level and that they cannot sustain themselves, after the implementation of the GST regime.”

Ms. Sitharaman also pointed out that the GST compensation scheme was brought in at a fairly high rate. “No State was growing anywhere near 14%. Everybody who analyses the economy will know it. For instance, Tamil Nadu’s growth rate was around 6.5%, before 2017. The State would have earned around ₹4.23 lakh crore. Whereas, the State had earned ₹5.23 lakh crore, because of the compensation scheme and post that because of the GST. You [the State] are better off today. The wild allegations that come about the GST system will have to be countered with patience. But when it comes from a State government, whose Finance Minister is sitting in the [GST] Council, randomly because it politically suits them, I leave it as such. But it has no logic in it.”

She said the Constitution gives the Union government every right to levy cesses. “Though the money collected through cesses is not shared with the States directly through devolution, it goes for building roads, schools, ports and hospitals. It is perfectly constitutionally legitimate for the Centre to collect cess. It doesn’t go through the devolution which was designed by the Finance Commission, a constitutional body,” she added.

Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha on August 8, 2024. Photo: Sansad TV via PTI

The Union government has nothing to do with imposing the goods and services tax (GST) on health insurance premiums, Finance Minister Nirmala Sitharaman insisted in the Rajya Sabha on Thursday (August 8, 2024), maintaining that the issue is entirely in the realm of the GST Council, which includes representatives from all State governments.

“Before GST too, medical insurance premiums were taxed,” she noted, during her reply to a debate on the Finance Bill. The Upper House returned the Bill following her reply, completing the process of approving the Union Budget for this financial year.

Countering charges that the Centre is pocketing the GST on health insurance premium, Ms. Sitharaman accused the Opposition of trying to gain political points on the issue. “Let the GST Council take a call,” she said, adding that every State levied taxes on health insurance premiums.

‘Write to State FMs’

Noting that the GST Council has discussed the issue thrice in the past, she said that the Finance Ministers of all States were present in the GST Council where decisions are taken by consensus. MPs who were protesting the tax with placards in Parliament must instead write to Finance Ministers in their respective States. “What stopped you?” she asked.

Objecting to allegations that the GST on health insurance premiums is “daylight robbery”, the Finance Minister pointed out that 50% of the GST collected goes to the States, and out of the Centre’s 50% share as well, 41% is given to the States.

Opposition members had also raised Union Minister Nitin Gadkari’s letter to Ms. Sitharaman on the matter. Without naming Mr. Gadkari, she said that the Opposition had got an opportunity to raise the issue with “some Ministers” writing a letter, claiming that “somebody” who was part of a delegation had put it out in the public domain without the Minister’s permission.

Balancing priorities

Ms. Sitharaman reiterated that the Union Budget balances several overriding imperatives, including growth, employment generation, capital investment, and fiscal consolidation. “We have tried to balance all these without compromising on any one sector,” she said.

The allocation for agriculture and allied sectors has increased in this Budget, the Finance Minister said. “₹1.44 lakh crore was the allocation last year, this time it has gone up to ₹1.52 lakh crore, that is ₹8,000 crore more,” she added. Ms. Sitharaman also questioned the conclusions of the Global Hunger Index, claiming that the report had been prepared without proper data from India.

New Delhi: Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi, Saturday, June 22, 2024.

The story so far: On June 22, the GST council recommended introducing biometric-based Aadhaar authentication for GST registrations, in a phased manner. In a media interaction after the conclusion of the council meeting, Finance Minister Nirmala Sitharaman stated that the measures endeavour to combat fraudulent input tax credit (ITC) claims made through fake invoices. She highlighted that the measure was formalised based on “good inputs” received from pilot projects run in Gujarat and Puducherry, in addition to a study in Andhra Pradesh. This is soon expected to be implemented across India.

What fraud the measure is trying to mitigate?  

Input tax credit (ITC) claims are a means to reduce tax liability by indemnifying the tax already paid on inputs for the tax liability computed on the output. Let us say, a manufacturer pays Rs 120 as tax for purchasing certain inputs or raw materials for their business. Now, their direct tax liability – which is based on the production incurred, is Rs 300. This is where the manufacturer can make an ITC claim. Since s/he has paid a certain portion in taxes for the input procurement, the difference of Rs 180 would be the net payable tax. Rs 120 is offset by claiming ITC.  

Since the rollout of the GST regime, a large number of GST frauds involving the use of fake invoices to fraudulently avail an ITC claim, inflate turnovers and/or assist in money laundering have been observed. These frauds are facilitated with the use of fake invoices, that is, invoices generated without the actual supply of goods or services.

Central Board of Indirect Taxes and Customs (CBIC) in a 2019 office memorandum had noted three ways in which this was executed. The first is more direct, wherein the invoice is used, without receiving any goods or service, to show payment of tax. This is then used to avail an ITC claim translating to a loss for the exchequer.

The second entails issuing an invoice to one entity and the goods being diverted to some other entity. The purchaser in this case may actually not be involved in creating an output product or service – a prerequisite of an ITC claim. However, they too may avail a claim on their tax liability which could be unrelated to the transaction incurred. All in all, it may potentially entail shifting ITC from exempted supplies to taxable supplies. 

Finally, the last of these observed methods entails routing of invoices through a series of shell and/or dummy companies and transfer of ITC from one company to another in a circular fashion to increase the turnover. Again, there is no supply of goods or services but the credit is availed based on fake invoices. In such instances, utilising inadmissible credit alongside the utilisation of credit emanating from actual regular supplies results in a loss to the exchequer.

In May last year, CBIC had launched a drive against bogus registrations and issuance of fake invoices. Over a seven-month period since its initiation, the drive had detected a total of 29,273 bogus firms involved in suspected ITC evasion totalling to Rs 44,015 crore, a report in January 2024 noted. The CBIC further informed that the discovery translated to savings of Rs 4,646 crore, of which Rs 3,802 crore was because of the blocking of ITC claims. Rs 844 crores were saved by way of recovery. Lastly, 121 arrests were made in this regard.  

What is the motive of such frauds?  

Other than GST evasion, CBIC has observed that the frauds facilitate money laundering and showing fake purchases for getting income tax benefits. About the latter, showing reduced profit margins and higher expenses helps in reducing net profits while accounting. This helps entities acquire income tax benefits. On the other hand, those seeking to present an inflated turnover could benefit from a higher credit limit or overdraft from banks, obtain bank loans and improve their valuations for a stake sale or an IPO, among other things. The fake invoice paradigm could also be utilised to divert for company funds in a manner that helps the entity save up on taxes from the conventional route.  

Would these measures help?  

Shashi Mathews, Partner at INDUSLAW with a practice focussed on tax-related issues, states that the intent and objective of the measure might be “progressive in nature” and would help achieve its stated endeavour. However, he adds, “A lot does depend on each state government’s readiness including but not limited to ensuring adequate resources and training for GST officials to seamlessly carry out such functionalities to keep a check on GST frauds on a larger scale.” Further, Mr. Mathews states that, when the functionality is released on a large-scale, it must be user-friendly for it to be successful. 

Mahesh Jaising, Partner at Deloitte India observed that the focus on high-risk applicants, particularly those with a history of cancelled or suspended registrations underscores the commitment to institute a “credible and transparent GST system.” The measures, supported by the Directorate General of Analytics and Risk Management (DGARM) and GSTN, would enhance the security and integrity of the registration process, Mr Jaising states. Additionally, he observed, “Industry hopes for a single biometric authentication across India, allowing one-time verification in any State for companies with a presence in multiple States.” In this context, he believes that this move would help streamline the process further and reduce redundancy.

While stating that the measures would avert fake invoicing to a large extent, Mr Mathews noted, “One cannot rule out discrepancies in the Aadhaar information itself. But that does not take away the fact that a majority of registrations in the future would have credibility due to this exercise.”  

Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi on June 22, 2024.
| Photo Credit: PTI

Union Finance Minister Nirmala Sitharaman said the 53rd GST council has taken a lot of decisions relating to trade facilitation and easing the compliance procedures for small businesses, MSMEs and other taxpayers.

Services by way of hostel accommodation provided to students outside educational institutions will be exempted from GST for services with a value of upto ₹20,000 per person per month, Ms. Sitharaman said.

Also Read | Move ahead: On GST and reform

This will be subject to the condition that such services are provided for a minimum continuous period of 90 days. This will particularly help students coming from rural areas, and will be a big relief for all students across India.

The GST Council has clarified that all solar cookers will attract 12% GST, whether linked to single or dual energy sources. the finance minister said.

The Council has also decided to exempt services provided by the Indian Railways to the common man such as waiting room, cloak room and so on, from GST. All intra-railway services will also be exempted from GST, she added.

The Council has decided to mandate biometric-based Aadhaar authentication for all GST registrations across the country in a phased manner. This is based on the successful rollout of pilot projects in Gujarat and Puducherry and will make the registration process quick while curbing the fraudulent use of input tax credits through fake invoices.

Bharatiya Janata Party (BJP) leader Nirmala Sitharaman arrives to assume charge as the Union Finance Minister, at the Ministry of Finance in New Delhi on June 12, 2024.
| Photo Credit: ANI

The Centre has decided to convene a meeting of the Goods and Services Tax (GST) Council on June 22, eight-and-a-half months after its last meeting, the Finance Ministry said on June 13, 2024.

“The 53rd meeting of the GST Council will be held on 22nd June, 2024 at New Delhi,” a ministry statement informed.

The Council that is generally expected to meet every quarter, has met just six times since 2022.

The agenda for the upcoming meeting is not known yet but State Finance Ministers can be expected to flag suggestions for the indirect tax regime that can be incorporated in the Union Budget likely to be presented next month.

Industry will also be keen for signals from the Council on the revival of a plan to restructure the complex multiple-rate tax structure, now that GST revenues have risen significantly, along with a promised review of the 28% levy on bets made in online gaming, casinos, and horse racing.

Consumers and industry would also be eyeing some visibility on the future of the GST Compensation Cess that was originally meant to be levied for the first five years of the GST regime that began in July 2017. The levy of the Cess, used to recompense States to come on board, had been extended after the pandemic.

At its last meeting held on October 7, 2023, the Council, headed by the Finance Minister, had initiated discussions on a “perspective plan” to impose a cess or surcharge on top of GST levies after March 2026, when the GST Compensation Cess is due to expire. The Council had then decided to meet in the future to discuss a replacement levy for the Cess and how those funds could be used.

Implementation of Bommai report

To rationalise and rejig multiple GST rates and simplify the tax structure, the Council had set up a group of ministers (GoM) under former Karnataka Chief Minister Basavaraj Bommai in late 2021. Some initial recommendations of the ministerial panel to withdraw exemptions and concessional rates on several items had been accepted by the GST Council in June 2022.

However, the panel did not move forward on its broader rate rationalisation mandate, with officials citing high inflation and revenue considerations as key factors to put the exercise on the backburner. The GoM also remained in suspended animation after Mr. Bommai’s party lost the Karnataka assembly polls last May. The GoM was reconstituted in late 2023 with Uttar Pradesh Finance Minister Suresh Kumar Khanna as its convenor.

Apart from broader reforms to the indirect tax regime, tax experts also hope for resolution of some long-pending operational issues and challenges at the upcoming meeting.

“Multiple clarifications are being looked after to including taxability for the online gaming sector before October, taxability of ESOPs, corporate guarantee taxability, and various rate-related clarifications are also anticipated due to recent litigations,” said Abhishek Jain, indirect tax head and partner at KPMG. 

Somnath Zende, 39, a police sub-inspector (PSI) in Pimpri-Chinchwad, Pune’s largest satellite city, says he trains at the gym for two hours, before work begins at 9 a.m. To build his body, he spends ₹600 daily on protein shakes and other supplements, besides his expenditure on the gym membership.

About three months ago, as chatter about the ICC Men’s Cricket World Cup grew through media channels and across dining tables, his brother, Ganesh, 26, downloaded Dream11, a fantasy sports app, on Zende’s budget smartphone. Zende himself ‘invested’ ₹1,500 on creating Dream11 teams over the next few months, a great deal less than what he spends on bodybuilding each week.

But on October 10, when he won ₹1.5 crore for assembling a ‘fantasy’ winning cricket team for the England-Bangladesh match in Dharamshala, Zende was suspended for “promoting” real-money gaming, as a senior officer in the Pimpri-Chinchwad police says. The officer adds that playing these games is “not socially correct”.

The suspension laid bare the continuing tension between governments and law enforcement officials concerned about Indian citizens’ mental health on one hand, and fantasy sports gaming companies concerned about revenue, on the other. A Deloitte report from 2022 values the nascent industry at ₹34,000 crore.

Euphoric from the win, Zende, in uniform, had given media interviews — including to the BBC — that went viral, speaking in Marathi about how he had assembled the team that led to the win. The reason for his suspension on paper was that he had violated Maharashtra State Police’s code of conduct by a) playing the online game without permission from his unit commander, b) giving media interviews about his personal victory in uniform, and c) potentially being on the app while on duty.

An inquiry was opened into whether he was playing the game on duty as a PSI of the riot control police. “We would have been very happy if he had won in the real team 11,” says one of the officers on the investigation team.

App happy

Fantasy gaming apps allow users to deposit money in-app to build a virtual team or teams of players, and pit them against others. Users may win different amounts, depending on players’ actual on-ground performance. Those who top the leaderboard win the maximum cash, with a few others also reaping in some benefit. Many simply lose their money; some get back just what they had put in.

Much like mutual funds and stock market investment firms do with all advertising, companies in the real-money gaming app space declare the cash people put in as “financially risky”. However, these companies have successfully resisted the “betting and gambling” label in India’s courts. In fact, Dream11, which calls itself a strategy-based game, and others like it, have been upheld in various judgments as centred around skill that cannot be prohibited by State governments. This makes earnings from these apps taxable, and Zende will get roughly two-thirds of the ₹1.5 crore after fees and tax deductions.

In the past though, the concern of at least four State governments — reflected in various court proceedings in the High Courts — is that real-money gaming is in essence, gambling.

Dream11, one of the official partners for the ongoing ICC World Cup, raked in over ₹4,000 crore in annual revenue in 2021-22. Founded in 2008 as a free-to-use fantasy league for cricket fans, it began in-app purchases in 2012, and has grown to be the biggest fantasy sports league in India, with over 20 crore registered users playing across live cricket, football, and kabaddi, according to its website. “In the fiscal year 2022, Dream11 had the highest ad spend among fantasy sports and real-money gaming companies in India, with around 21.6 billion Indian rupees,” says an article on Statista, a data intelligence service.

Legal eagle

Recalling the day he won, Zende says, “A friend called me up and told me my name was flashing on TV. I was so happy. I told my wife immediately, and she said, ‘That’s not possible; things like this don’t happen’.” But it had. After two weeks, he talks about the win with a certain nonchalance, to some extent because of all that has happened since: the indefinite suspension from service, the viral reach of his win, and the media circus around both.

As videos featuring interviews of Zende went viral on WhatsApp, and Pimpri-Chinchwad, an emerging industrial hub, came into the limelight, a local politician took note. Amol Thorat, who was until recently the city’s BJP general secretary, shot off a letter to the police commissioner and to other top officials in the State government. Forwarded interview clips made it look to him like Zende was promoting online gambling, Thorat’s aide says. “He took up this issue and gave a letter to the commissioner saying it’s against the law. And the pressure started building up.”

On his part, Zende, who has not broken his routine of going to the gym from 6 a.m. to 8 a.m., refuses to speak about the suspension while he is being investigated. He has busied himself visiting relatives in and around Pimpri. “My philosophy in life is just to be happy, no matter what,” says the family man, with two children, aged 7 and 3, as he breaks into a faint smile. When the term “online gambling” comes up, he quickly clarifies, “Not online gambling, skill gaming.”

Vinayak (first name withheld on request), a police constable, who works under Zende, says, “He doesn’t take tension (sic) at work. Outside the station, he freely speaks his mind.”

Born to farmers in Jejuri — a part of the Pune district and home to the Shaivite Khandoba Temple, a pilgrimage destination — Zende moved to Pimpri in 2011 and started work as a constable in 2012. After three years of preparation and obtaining a B.A. degree, he cleared the Maharashtra Public Service Commission’s entrance examination to join as a PSI in 2016. He had started working out around this time.

Concerns of States

States have been worried about the rise in people landing in financial trouble, and worse, taking their lives from the trauma of losing lakhs of rupees when they play real-money games online. Gaming disorder is a mental health condition, after all. In Tamil Nadu alone, a four-member committee found that 17 people in the State had killed themselves after they had lost money on these apps. States such as Karnataka and Tamil Nadu tried to prohibit these games, but the bans were overturned in their respective High Courts.

Some States decided that enough was enough. Zende’s was one of them. A Group of Ministers (GoM) chaired by Maharashtra was formed at the GST Council, the powerful body that decides the rates and terms of sales taxes. The plan was simple: instead of taxing firms like Dream11 on the 5-20% commission they imposed, charge the entire amount that users deposited.

“Activities detrimental to social well-being should not be encouraged or promoted,” Sudhir Mungantiwar, a Maharashtra Minister, who headed the GoM, said in its final meeting. Minutes of that meeting, released in October, say that he took a “resolute stance” on the issue. The tax, which kicked in on October 1 this year, is 28% of the ‘face value’ of bets. This means that if a user puts ₹100 into their wallet on the app, ₹28 will be taxed, against the earlier ₹4 or less.

Sanjay Malhotra, the Union government’s Revenue Secretary, went even further: people were being taxed less when they were risking their money than when they were buying essential food items, he complained. Whether something was a game of skill or chance wasn’t the determining factor anymore. Everything was taxed: from casinos and horse races to real-money games and lottery tickets.

The industry has been quiet since the tax was announced, after briefly expressing anguish at its imposition. “We are deeply distressed,” one firm lamented in a press statement. Real-money gaming began internationally in the late 1990s, with India picking it up in the early 2010s. It boomed as Internet prices fell and smartphones became cheaper and apps more accessible.

A top office-bearer of the Federation of Indian Fantasy Sports, of which Dream11 is a founding member, declined to discuss either the current legal situation or Zende’s dismissal. Another top official from the All India Gaming Federation, with 56 member companies on its membership rolls, did not respond to calls. A Dream11 spokesperson declined to comment too.

Zende hasn’t decided what he will do with the money yet, not even if he will pay off his ₹30-lakh home loan for a house he has bought in Pimpri-Chinchwad. As he waits for the inquiry report, due in about six months, he’s clear about one thing: he won’t quit his job, even though he has won far more than his salary will amount to over his police career. “I won’t leave this job,” he says. “I’ve worked very hard for it.”

If you are in distress, please reach out to these 24×7 helplines: KIRAN 1800-599-0019 or Aasra 9820466726.

Finance Minister Nirmala Sitharaman. File
| Photo Credit: PTI

Amid the sustained slump in India’s exports, the Goods and Services Tax (GST) Council has cleared a few measures to boost foreign trade, including enabling tax credits for services exporters receiving payments in rupees, critical for trade with countries like Iran and Russia that face global sanctions.

The government has been pushing for rupee-based trading arrangements with several countries to reduce the dependency on the U.S. dollar, and banks from over 20 nations have opened special rupee (INR) Vostro accounts with Indian banks to remit payments for their imports from India. However, many exporters of such services were being denied input tax credits under the GST regime as the norms required foreign currency receipts to recognise the ‘export’ status.

“The Council has recommended to issue a circular to clarify the admissibility of export remittances received in Special INR Vostro account, as permitted by the Reserve Bank of India, for the purpose of consideration of supply of services to qualify as export of services under the Integrated GST [IGST] Act, 2017,” the Finance Ministry said in a statement after Saturday’s meeting of the GST Council.

There were disputes arising from refund applications, where the GST officers would seek to deny the benefit on the ground that receipt of consideration in INR did not meet the condition prescribed for the purpose of qualifying as ‘exports of services’, explained Sanjay Chhabria, director, indirect tax at Nexdigm.

“This clarification will bring respite to the exporters whose refunds of GST were stuck for a long time on account of the disputes in respect of this particular aspect, and they were also being subjected to GST demands,” said Saurabh Agarwal, tax partner at EY.

Shashi Mathews, partner at Induslaw, said the proposed clarification shall particularly help firms which are seeking to receive export proceeds from Iran or Russia, which have U.S. sanctions imposed on regular remittance routes.

Relief for SEZ suppliers

Separately, the Council also decided to undo the effects of a July 31 notification that had made it difficult for firms supplying goods or services to special economic zones (SEZs) to claim tax refunds.

Mr. Chhabria said this move seeks to rectify an anomaly arising out of an inadvertent omission of such category of supplies from the option of refund with payment of tax, after amendments were made to the IGST Act.

“With the explicit inclusion of such supplies for rebate, the ambiguity on this comes to a rest and helps prevent apprehended potential working capital concerns for domestic industry engaged in SEZ supplies,” remarked Abhishek Jain, indirect tax head and partner at KPMG.

The Council has also recommended issuance of a circular to clarify the place of supply treatment for services entailing transportation of goods, including by mail or courier, in cases where the location of supplier or the location of recipient of services is outside India. The communique is also expected to clarify issues relating to supply of advertising and co-location services.

Industry has been awaiting clarifications on the export of goods by mail or courier for some time now, but the fine print will have to be studied to assess the impact, said Mahesh Jaising, partner and leader, indirect tax, at Deloitte India. “It is unclear if clarifications on advertising and co-location are in relation to export or domestic place of supply,” he added.