The review is aimed at clearing the air on issues such as whether services provided by back offices of multinational companies in India qualify as exports, which are zero-rated and therefore don’t face tax.
The Centre has begun a comprehensive review of the goods and services tax (GST) law, as well as various rules pertaining to the levy, to provide clarity on issues that have cropped up since it was rolled out in July 2017. The review is aimed at clearing the air on issues such as whether services provided by back offices of multinational companies in India qualify as exports, which are zero-rated and therefore don’t face tax.
Similarly, there is confusion over discounts, reimbursed by FMCG and consumer durables companies to their dealers to sell products at specially reduced prices, being liable for GST or not. The review is expected to simplify the law and reduce disputes.
A government official said these issues, along with many others, will then be taken to the officials’ committee of the GST Council for discussion. Subsequently, based on the feedback, a detailed proposal will be put to the council for a final decision.
“The idea is to iron out any legal issues to make the regime simpler, as was intended,” said the official.
The official added that the central and state governments had received multiple representations from the industry on these matters.
States and field formations have also flagged issues that need to be clarified — either through a change in the rules or the law itself. “It was felt that some of the issues that have been flagged should be examined and necessary clarification or changes to laws should be taken up to address them to bring down litigation,” the official said.
The government has sought to reduce litigation over direct and indirect taxes, but GST has seen a rise in disputes at multiple forums. Conflicting views on several issues, including from the Authority for Advance Rulings, have also added to the conundrum.
For example, there are more than 200 companies involved in disputes on the definition of “intermediary” services. This is despite back office services of multinationals being treated as exports and not having any tax levied on them in the pre-GST era. Similarly, there are multiple disputes on the levy of GST on reimbursements offered to dealers by FMCG companies to sell products at a particular price.