GST Council may reject CCI tax exemption plea
Fitment committee recommends rejecting MOSPI request for a waiver
Arequest from statutory bodies like the Competition Commission of India (CCI) and the International Financial Services Centers Authority (IFSCA) for exemption of indirect tax on the services they provide is likely to be rejected at the upcoming meeting of the Goods and Services Tax (GST) Council.
The fitment committee, a panel of officers of the Centre and the states, has recommended against granting the request ahead of the Council meeting in Lucknow on Friday.
Similarly, the panel has also recommended rejecting a request by the Ministry of Statistics and Programme Implementation (MOSPI) for a GST waiver for hiring office space from MTNL.
The panel has also not endorsed a request by the Karnataka government seeking GST exemption for a slew of services and accommodation provided to the members and ex-members of the legislative Assembly.
Meanwhile, the fitment committee has endorsed GST exemption for the FIFA Under-17 Women’s World Cup 2021 and for AFC Women’s Asia Cup 2022 tournaments that is scheduled to host.
CCI sought exemption for activities performed by the body, arguing that those are “statutory obligations”, essentially for protection of competition in the marketplace and to remove distortions in the national interest. This cannot be compared with economic activity performed by trade or commerce in general and shouldn’t attract indirect taxation, CCI had argued. Besides, the fee deposited by the parties is not a consideration, which could qualify as service.
IFSCA also made a similar request, but the fitment panel noted that there is no blanket exemption for statutory bodies in the GST.
“The CCI has also noted that other regulatory bodies like Sebi (Securities and Exchange Board of India) and Irdai (Insurance Regulatory and Development Authority of India) have been exempted from the liability of GST. But, in those cases, the exemption has continued from the service tax regime. No new exemption was provided,” said a government official.
In the earlier regime, too, there was a view that any activity undertaken against a consideration constitutes a service and the amount charged for performing such activities is liable to service tax, he said.
“It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law. And, that continues,” said a government official. The work of IFSCA differs from other the Reserve Bank of India, Sebi, Pension Fund Regulatory and Development Authority (PFRDA), and Irdai, he added.
Similar requests by the PFRDA, Warehousing Development and Regulatory Authority (WDRA), and Petroleum and Natural Gas Regulatory Board (PNGRB) were also rejected by the Council earlier.
Meanwhile, in the case of MOSPI, it had sought exemption from GST to be paid to MTNL for the advance rent it paid. MOSPI argued that the GST on the advance rent paid was “substantially high” and, therefore, exemption should be provided as GST was to be paid from the government to a public sector undertaking.
However, the fitment panel has taken the view that services of renting space attract a standard GST rate of 18 per cent and it is immaterial if the government is renting space from a PSU or private owner. “All the ministries are paying GST on renting service,” said an official.
In Karnataka’s case, the state government had sought GST exemption of services such as accommodation at legislators’ home complex at nominal rent, conveyance with nominal rate per km, health club at nominal rate and commercial establishments for essential needs of members like laundry, bookshops.
The panel said similar requests were earlier rejected by the Council. Besides, some of these charges were very small, which these MLAS could afford to pay. “But we have left it to the Council to take a final call on the issue,” said another government official.