“After approval by Parliament, this section will be implemented through a notification. This move will enable the Council to consider invoking this principle whenever and wherever it deems appropriate,” he added.
What is Section 11A?
Simply put, this section allows sectors that have paid GST at a lower rate than that which was subsequently applied by the GST authorities to seek relief from previous actions or demands. can go. This ensures that the government cannot impose higher GST rates when lower rates are paid due to common trade practices across the industry, not just isolated cases.
Further, this section provides relief from demands for lower tax payments by previous operations or entire sectors. It empowers the GST Council to consider avoiding raising ex ante tax demands where industries have paid lower rates of GST due to unclear or undefined rates.
Also, the amended GST law will prevent refund of GST or cess where overpayments of GST have already been made. The move aims to prevent claims against companies for past compliance based on prevailing trade practices and tax uncertainty.
“After approval and notification by Parliament, this Section 11A can be used after sector-wise discussion in the GST Council and as and when required,” sources said.
Section 11A will give the Government legal support to use this section when the Council makes a decision for a sector.
What do the experts say?
Experts say the GST Council's move could help the government review and provide relief to companies from retrospective action for lower tax payments. Saurabh Aggarwal, Tax Partner, EY said, “The GST Council's recommendation to introduce Section 11A in the Central Goods and Services Tax (CGST) Act would mark a positive step towards achieving a more equitable tax environment. This new provision empowers the Central and State Governments, following the recommendations of the Council, to waive the uncollected GST dues arising from the prevailing industry practices that Section 11A pre-paid GST. However, the amendment provides a mechanism to correct past errors in tax assessments, potentially benefiting businesses that operate under ambiguous or industry practices. establish which are subsequently deemed non-compliant.”
He added, “The effectiveness of Section 11A depends on a clear definition of 'ordinary practice' and the implementation of well-defined guidelines around it. These aspects must be carefully considered to ensure that The provision achieves its intended purpose. Additionally, Section 11A has the potential to accelerate past disputes in online gaming, co-insurance, and imports of services by foreign shipping lines and airlines. A more streamlined and predictable tax environment for
Pratik Jain, Partner, PwC is optimistic that the earlier exemption may also bring relief to online gaming.
“I think the government is looking at maybe using this clause to provide relief to certain sectors, maybe even online gaming. What has happened in this council meeting is that they have now put in an enabling provision. has been approved which allows the Government to provide ex parte exemptions.This type of provision existed in the pre-GST era, was not approved in the GST Act This provision will be in place after the budget meeting is likely to take place.
MS Mani, Partner-GST, Deloitte India said, “There is now a real desire on the part of the government to recognize trade practices and business practices that are not linked to GST. And trade practices, Business practices are unique to every industry. It's too much to expect all businesses in a sector to change their business practices just because a provision in the GST law can be interpreted that way To have that say we will now recognize trade practices, business practices, provided it's consistent, to me is a huge step that they've taken this time.
On online gaming, Mani added, “We obviously have to wait and see what exactly the notification is and how they interpret it for them.”