Relief for industry as govt cracks down on GST demand notices
By: Admin
July 06, 2024
Categories: GST Recent News
4 Min Read
In a major relief for the industry and GST taxpayers in the country, the government has decided to send any GST demand notices to the taxpayers, only once there is approval from the North Block.
According to official sources, “The Directorate General of GST Intelligence (DGGI) can not send any tax demand notices where it is an interpretation or a classification matter, without the approval of the policy wing under the Central Board of Indirect Taxes and Customs (CBIC).”
DGGI is the central intelligence agency of CBIC, which keeps a close vigil on tax dues, tax unpaid, tax evasion and misreporting of taxes, under the GST regime.
The investigative arm was often accused of sending notices to taxpayers, and industry, where the industry held a different view and the intelligence arm held a different assessment of taxes, leading to stuck payments, delays in taxes and piling up of cases.
Sources told CNBC-TV18, “The move is aimed at reducing litigation, deploying the intelligence resources in the right direction and where they are needed the most, thus bringing in ease of living and ease of doing business under the GST regime.”
“Through this, the DGGI resources will be used more efficiently and will lead to meaningful conclusions to cases and demand notices,” the sources said.
Sources added, “The DGGI will continue to conduct investigations, checking tax leakages and, as and when it detects an evasion, it will inform CBIC … It will be then upon CBIC on whether it wants to announce corrective clarifications to avoid discrepancies and loopholes in the law.”
According to An Expert, “interpretation” under the GST regime has been a core area of concern and has led to massive investigations and proposed tax demands.
Taking approval from the finance ministry before sending tax notices will ensure that the interpretation that the tax policy wing of the finance ministry had considered would be a guiding factor for all notices, Rastogi said.
Apart from this, the recent 53rd GST Council meeting has approved a series of clarifications, which has given a breather to several sectors including foreign shipping lines, MNCs, foreign airlines, start-ups, etc, operating in the country, which were embroiled with a series of DGGI notices.
Sources said, “The recent notifications have put to rest notices sent to several sectors, making them null and void, putting them to rest on ‘as is, where is, basis.”
For instance, foreign shipping lines were facing notices worth about ₹1 lakh crore, foreign airlines were facing notices worth ₹15,000 crore and MNCs were contesting about 300 notices worth ₹4000 crore, the sources said.
“All these cases will now be concluded in the favour of the industry based on these clarifications approved by the GST council,” they added.
This, Rastogi said, was yet another matter foreign airlines and shipping airlines were facing. She said there were challenges related to the interpretation of whether there is an import of service by their Indian branch offices.
“This is again an interpretation which needs to be done coupled with the fact that common trade practice will be accepted by the government as a particular section is being proposed to be inserted in the legislation,” she said.
“The government is likely to consider ways to waive tax demands raised on foreign shipping and airlines on account of deemed import of services. These demands stem from ‘reverse charge’ rules, where their overseas headquarters’ expenses are taxed in India,” another expert said and explaining, “A new Section 11A, proposed for the GST Act, could provide the solution … (granting) the government power to waive taxes due to common business practices. However, even with Section 11A, the GST Council would still need to recommend its use in this case. Finally, a notification could be issued after a recommendation to officially remove the tax liability.”
Several cases pertaining to the issuing of ESOPs, corporate guarantees, etc, will also get settled, the sources said.
Another tax expert says, “The Directorate General of GST Intelligence (DGGI) has gained a reputation as the most formidable authority within the GST framework, often perceived as the ‘bad boys’ of the tax department. The prospect of restricting their ability to issue frivolous notices, especially on interpretative matters, is indeed a welcome development. Requiring DGGI notices to be approved by the GST Policy Wing would ensure a more consistent and fair approach, providing much-needed relief to taxpayers. This change would significantly enhance the ease of doing business in India. While some may argue that it could limit the government’s ability to recover substantial revenues, this move is essential for creating a more predictable and taxpayer-friendly environment.”
Source from: https://www.cnbctv18.com/economy/gst-demand-notices-relief-for-industry-as-govt-cracks-down-dggi-cbic-19438787.htm
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