Budget 2024: Finance Bill likely to include enabling amendment to retract retrospective GST notices

The GST collections have totalled Rs 5.57 lakh crore in the first quarter of the year, averaging Rs 1.86 lakh crore per month.

With the Union budget slated for July 23, the finance bill is likely to include enabling an amendment to the Goods and Services (GST) Act that empowers the GST Council to retract tax notices sent retrospectively. The two segments that will particularly benefit are online gaming and corporate guarantee, two people familiar with the development said.

“The insertion of Section 11A insertion via amendment in the Central Goods and Services Tax Act, 2017, is likely to be a part of the finance bill in the Union budget. It will impact online gaming and corporate guarantee retrospective GST notices, among others,” a government official told Moneycontrol.

At its 53rd meeting, the GST Council recommended inserting the section to empower the government to regularise instances of non-levy or short-levy of GST, based on the council's recommendations, when such tax was not being paid due to common trade practices.

Once the finance bill is passed by Parliament, the amendment is expected to pave the way towards providing relief to India's burgeoning real-money gaming (RMG) companies that have received GST notices for the period between July 2017 and March 2023.

GST show-cause notices have also been issued retrospectively to several companies for payment of tax on corporate guarantee. The companies have filed an appeal against it, a person aware of the development told Moneycontrol.

When a subsidiary company takes a loan from a bank, usually the parent company gives a corporate guarantee on the loan. The GST authorities have sent notices treating the corporate guarantee as supply of service and demanding payment of tax on it. The notices sent are for the period 2017 onwards.

The last GST Council meeting clarified that the companies will not have to pay GST on such guarantee if the company is eligible for input tax credit. As long as the subsidiary is able to claim input tax credit, the GST on corporate guarantee becomes revenue neutral.

Once the budget is passed in Parliament, all the companies that have received retrospective tax notices are likely to give representation to the law committee of the GST Council to quash them in view of the amendment, the person said.

In the case of online gaming, the GST authorities sent Rs 1.12 lakh crore worth of tax demands in 2022-23, and in the first seven months of 2023-24. This includes notices to skill-based gaming firms such as Dream Sports, Gameskraft, Games24x7, Deltatech Gaming and Head Digital Works.