GST@6: Forward looking thought
Export rule liberalization – 78% respondents cited this as the most needed. To illustrate, while the Central Board of Indirect Taxes and Customs issued a defining circular in September 2021 clarifying doubts on the scope of intermediary services, the benefit is yet to be fully witnessed with certain categories of exporters in the IT/ITeS and data hosting services sector still being continually questioned, resulting in prolonged litigation and the delay in refund resulting in working capital blockages.
Several countries including Australia, China, UK, Singapore, EU, Russia, Netherlands, New Zealand, Ethiopia, and US (Hawaii only) follow destination principal for intermediary services. With India’s services exports shooting up a record 26.6% in FY23 to $322 billion and SEPC estimating that it may touch $400 billion in FY23, the government could consider reviewing the export rules and removing the exceptions to help our flagbearer export services sector.
Taxation of deemed supplies – About 73% respondents found favor with the proposal to introduce regulatory amendment to do away with the levy of GST on deemed supply on import of services under the reverse charge mechanism, where recipient is eligible to full input tax credit (revenue neutral). This would be aligned to global VAT laws, specifically EU VAT laws.
The issue has been a bone of contention, considering there is no clarity on the commercial exploitation principle which invokes taxability on such transactions, resulting in inquiries and litigations. Unlocking of working capital – More than 80% businesses concurred that the transfer of CGST and IGST cash ledgers amongst “distinct persons", has ensured seamless intra-organisational transactions and efficient
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