Central Government started reviewing legal issues in GST

The Central Government has started a comprehensive review of the Goods and Services Tax (GST) law and rules to clarify issues raised since July 2017. This review aims to clear the doubts on many issues, including:

• Whether services provided by back offices of multinational companies in India qualify as exports or not
• Whether GST is applicable on discounts reimbursed by FMCG and consumer durables companies to their dealers to sell products at specially discounted prices

A government official said this review is expected to simplify the law and reduce disputes. First of all, these issues will be taken to the committee of the GST Council for discussion. Subsequently, the committee will put a detailed proposal to the council for a final decision based on the feedback.

The official also said that the idea is to flatten out any legal issues to make the regime simpler. Also, the official pointed out that the Central and state governments had received multiple representations from the industry on these matters.

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States and few organisations have also flagged issues that need to be clarified by changing the rules or the law itself. The government felt that some of the issues that have been flagged should be examined and should provide necessary clarification or make changes to laws to bring down litigations.

The government has sought ways to reduce litigation over direct and indirect taxes, but GST has seen a rise in disputes at multiple forums. Conflicting views on several issues and rulings of Authority for Advance Rulings (AARs) have also added to the problem.

For example, more than 200 companies are involved in disputes on the definition of “intermediary” services, despite the back-office services of multinationals being treated as exports and not tax levied on them in the pre-GST era.

Even though the GST department is issuing circulars to clarify provisions to clear the confusion, there are still grey areas where one cannot determine the exact applicability of GST. This extensive review of legal issues in the GST law is a good move to clarify these grey areas. The tax experts and taxpayers await proper clarifications and changes in the law through this review to ease GST compliance.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@cleartax.in.