The central government is likely to give GST relief to Infosys, foreign shipping lines and foreign airlines, according to a CNBC-TV18 report on Thursday. The report added that the Centre is considering introducing changes on the June circular in the upcoming GST Council on September 9.
The report said that the Centre feels that the service sector needs clarity in GST and ease of doing business as well. The report also added that DGGI had recently sent notices to India’s second-largest IT company along with many foreign airlines.
Ankur Gupta, practice leader (indirect tax) at SW India, said, “The recent GST circular number 210/4/2024, dated June 26, 2024, allows the transaction value for the import of services between group companies to be considered as NIL, provided the recipient can fully avail of the input tax credit (ITC). However, this relief does not extend to situations where the services are used for exempted or non-GST supplies. In such cases, the recipient may not be able to claim the full ITC, as the GST law restricts credit on inputs and services used for making exempt supplies under Section 17 of the CGST Act, 2017. This limitation means that GST could still be levied on the import of services based on the actual consideration or open market value, even between group companies.”
Moreover, if the imported services are partly used for exempted or non-GST activities, the recipient would need to proportionally reverse the ITC as per the GST rules. This reversal would negate the benefit of the NIL valuation and could lead to a GST demand on the portion of services used for such supplies. Therefore, while the circular provides significant relief in certain scenarios, businesses involved in exempted or non-GST supplies must carefully assess their transactions to ensure compliance and avoid unexpected tax liabilities, Gupta added.
On July 31, Infosys received a ‘pre-show cause’ notice from Karnataka State GST authorities, for alleged GST evasion to the tune of about Rs 32,403 crore.
On August 6, the Directorate General of Goods and Services Tax Intelligence (DGGI) had issued show-cause notices to 10 foreign airlines, including British Airways, Lufthansa and Emirates, for allegedly not paying Rs 10,000 crore in taxes, according to an Economic Times report. The notices pertained to unpaid taxes on the import of services by Indian branches from their head offices.
According to a PTI report, the 54th Meeting of the GST Council is likely to take up matters regarding reducing tax slabs, rate rationalisation, besides removing duty inversion under GST.
