GST Council may Treat Intermediaries as Exporters and Reduce 18% Tax

The upcoming 56th meeting of India’s GST Council could bring major relief to middlemen like brokers, agents, and online platforms. The government are planning to treat their services as exports, which means they won’t have to pay any GST on them. A senior government official told Business Standard that this change is likely to get final approval once the Law Committee agrees to it.

This proposal will remove the current 18 percent GST that these middlemen have to pay on their services. Companies engaged in textiles, trade in commodities, and provision of IT services, notably, can save huge amounts of money. The official said that if the Law Committee agrees to this proposal when it is tabled before the GST Council at their next meeting, it could be a game-changer for export businesses in the country that rely on middlemen.

Currently, according to a particular rule in the GST legislation, even when these intermediaries are working for foreign clients, the service they provide is still treated as being provided in India. Therefore, they still have to pay GST in India. The new proposal wants to change this rule so that these services are treated as exports, allowing companies to claim back the GST paid on their business expenses.

The official pointed out that this change will help Indian middlemen compete better with foreign companies. Currently, when Indian middlemen charge GST to their foreign clients, those clients can’t get that money back, making Indian services more expensive.

Apart from saving money, this change could also help solve pending tax disputes worth Rs 3,357 crore. Many of these disputes involve companies in export-focused industries.

In another development, Finance Minister Nirmala Sitharaman plans to ask state governments to follow the same simplified GST registration rules that were recently introduced for central government officers. These new guidelines, issued in April by the tax department, are designed to reduce arbitrary decisions and make the registration process the same everywhere.

The updated guidelines instruct officers to only use required files, ask no unnecessary questions, and get the applications done in prescribed time frames – seven working days for normal cases up to 30 working days for high-risk cases where physical checks are required.

A senior official explained that the finance minister will encourage states to follow these same guidelines properly. Since GST is managed jointly by the centre and states, it’s important that rules are applied uniformly across the country.

The official said that early results from implementing these rules at the central level look promising. While they don’t have complete data yet since it’s only been a month, they’re seeing more people registering for GST. They also plan to ask states to share their numbers to see the overall impact.