Business Standard

GST Council may reject CCI tax exemption plea

Fitment committee recommends rejecting MOSPI request for a waiver

- DILASHA SETH New Delhi, 15 September

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.

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