The issue surrounding a Goods and Services Tax (GST) demand notice for approximately Rs 32,000 crore against information technology (IT) major Infosys is likely to take longer amid the GST law committee still deliberating its options before any decision can be brought up before the GST Council for its approval.
According to sources familiar with the matter, the GST Council’s upcoming meeting on December 21 will not address the relief for Infosys, as the matter is still not on the agenda.
“Infosys GST notice issue is not yet resolved. However, it’s not on the agenda for the Council meeting slated to be held on December 21. It has to be deliberated by the law committee first,” a government official told Moneycontrol.
Another source familiar with the discussions indicated that a nuanced clarification to the circular issued on June 26, 2024 (Circular 210), may be considered in a bid to provide relief to Infosys. The circular primarily addresses issues related to the import of services by entities from related persons or their other establishments outside India, where the recipient is eligible for full input tax credit (ITC). However, in the case of Infosys, the company’s overseas branch offices did not meet the criteria for claiming full ITC, which led to complications with the application of the circular.
“Relief to Infosys is likely, though it may take some time,” said a third source.
Infosys, in a filing to the Bombay Stock Exchange (BSE) in July 2024, revealed that Karnataka State GST authorities had issued a pre-show cause notice, demanding Rs 32,403 crore for the period between July 2017 and March 2022, for expenses incurred by its overseas branches. Infosys responded to the notice, and sources indicated that while relief for the company is expected, it may take some time for the issue to be settled.
While Infosys’s case is still under deliberation, the GST Council is set to discuss other significant proposals during its upcoming meeting.
Food delivery apps
The GST Council is set to clarify a key taxation issue concerning the delivery charges levied by food delivery apps such as Zomato and Swiggy. These platforms have been treating delivery charges as exempt from GST, but this interpretation has been challenged by the Directorate General of GST Intelligence (DGGI). The Council is expected to bring clarity to the matter, stating that delivery charges should be considered part of a composite supply and therefore subject to a 5 per cent GST rate without ITC.
The Council is likely to clarify that delivery charges are integral to restaurant services facilitated by these apps. This clarification is expected to be applied retrospectively from 2022. “There will be a tax liability on food apps that they will have to pay,” the official said.
“The problem was of interpretation. Food apps were not paying GST on delivery charges. This was objected to by the DGGI,” said an official. “The view is that it’s a composite supply—delivery is part of the restaurant service. As such, GST at 5 per cent applies to the entire value of the supply, including delivery charges,” he added.
The official noted that the DGGI had sent notices stating that if food delivery apps consider delivery as part of restaurant services, then they are liable to pay 18 per cent GST. However, the Council’s decision to treat the supply as a composite service taxed at 5 per cent would also mean that previous GST demand notices sent by the DGGI for higher tax rates will no longer apply.
Old vehicles
The GST Council’s Fitment Committee has recommended an increase in the GST rate on the sale of old vehicles and electric vehicles (EVs). At present, the sale of old cars is taxed at a rate of 12 per cent, but the committee has proposed raising this to 18 per cent to bring it in line with the existing tax structure for larger vehicles and sports utility vehicles (SUVs).
“The differential in sale price of old cars is currently taxed at 12 per cent, which is proposed to be increased to 18 per cent. Resale of electric vehicles is also included. It’s a correction of an anomaly. Not much revenue generation is expected from this exercise,” the official added.
Source: moneycontrol
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