India to adopt EU-Style VAT Grouping for GST Overhaul?

India is considering a significant change to the GST framework by potentially excluding related-party transactions from the GST net aiming to simplify tax compliance and reduce the administrative burden on businesses.

This proposed change is similar to the VAT grouping model under the EU VAT system, where transactions between closely linked entities within a group are not subject to VAT.

Key benefits to the businesses from the move;

– Simplified tax structure
– Reduced compliance costs
– Enhanced ease of doing business

However, taking cue from the EU VAT legislation, below potential exceptions may still be considered;

– Partially Exempt Groups: If any member of a group incurs exempt input tax, the entire group might be considered partially exempt, requiring specific calculations

– Special Status Members: Entities with special status, such as those providing education or cultural services, might have different VAT outcomes

– Retail Schemes: Retailers using specific schemes may need to apply these to the group as a whole

Let’s see how and when it turns out.