GST cuts on molasses, millets & alcohol; a ray of relief for online gaming

The 52nd National GST Council Meet convened on Saturday, 7 October, saw extensive deliberations aimed at alleviating tax burdens on a range of commodities.

Looking to offer some much-needed clarity on intricate taxation matters, the meeting was held against a backdrop of mounting concerns and ongoing legal disputes over GST on online gaming, among other things.

The discussion yielded a series of pivotal decisions, mostly on expected lines, reducing or eliminating taxes on molasses, millets and alcoholic drinks.

The Council made the crucial decision to reduce the tax on molasses from 28 per cent to 5 per cent.

Union finance minister Sitharaman highlighted that the reduction in GST on molasses would expedite payments to sugarcane farmers, while also positively impacting cattle feed manufacturing, which in turn should reduce investment for dairy farmers. "This will be a major development for the agricultural sector," she said.

In another noteworthy development, the Council decided to exempt alcohol intended for human consumption from GST, a move that aligns with a 2021 verdict by the Allahabad High Court. This decision grants states the authority to impose taxes on extra-neutral alcohol (ENA) if they choose to do so.

The Council clarified that while it had the authority to tax ENA, it had chosen to delegate this power to the states, in a bid to provide 'consistency'.

The GST on flour containing at least 70 per cent millet will now attract 0 per cent tax when sold loose and 5 per cent (down from 18 per cent for branded millet products) when sold pre-packaged and labelled. This step aims to promote the consumption of millets and enhance their affordability, the government said.

The Central government also clarified that the GST on online gaming companies is not being levied retrospectively and remains consistent as certain online games that involve betting had always attracted 28 per cent GST.

This clarification came in response to concerns raised by various states during the meeting. Delhi and Goa were among those to criticise prior announcements on taxation of e-gaming companies and casinos, which have been a subject of recent scrutiny.

Addressing the railways sector, in an effort to reduce costs, the Council decided that all goods and services provided by the Indian Railways shall be taxed under the forward charge mechanism, allowing them to avail input tax credit under GST.

The Council also introduced an age cap for members of the GST Appellate Tribunal (GSTAT), limiting the age of the president to 70 years and of members to 67 years, relaxing the previous limits of 67 and 65 years respectively.

Observers noted that the 52nd GST Council Meeting marked a significant step towards tax reforms, offering clarity on several hitherto contentious issues and providing some relief (even if some of it turns out to be notional) to the agriculture, manufacturing and online gaming industries.

While the impact of the decisions on the Indian economy remains to be seen, the clarifications and announcements do address a few longstanding concerns and challenges.