New amendments proposed to the goods and services tax framework may help resolve a number of issues that companies and industry associations have raised, and result in the withdrawal of several writ petitions they have filed in various high courts
The amendments are targeted at the problems raised by industry, said experts who closely track the tax system introduced a year ago.
In fact, a group of research and development centres, comprising mainly pharmaceutical, biotech and manufacturing companies, has already withdrawn its petition, taking note of the amendments that the government is bringing. These centres had approached the Delhi High Court last year saying that under GST, the government had reneged on a tax sop promise by removing exemption on locally sourced raw materials.
To encourage R&D companies to set up units in India, the government had exempted procurement of raw materials — whether imported or sourced domestically — from taxation for three years under the erstwhile tax regime. In the writ petition, they had pointed out that while the tax exemption on imported raw materials continued under GST, the benefit was withdrawn for raw materials sourced locally. The proposed amendments to the GST law could sort out this issue, said tax experts.
“After the recent amendment in the GST law, the leeway demanded by multinational R&D centres around imports has been extended under GST framework by way of reduction of rates. These (new) amendments could mean that issues that were earlier raised in the writ petition based on legitimate expectancy may be sorted,” said Abhishek A Rastogi, partner at Khaitan & Co, who had filed the petition for the R&D centres.
The development comes at a time when the government is trying to iron out issues in GST. ET on Tuesday reported that the government had directed tax officers to deal with writ petitions promptly as it could disrupt the GST regime.
Industry trackers said some of the issues raised by the companies could even lead to more changes in the GST law going ahead. “The key decisions emanating from writs can be considered for legislative changes in those cases where the law is either ambivalent or susceptible to incorrect inferences,” said MS Mani, partner at Deloitte India.
At last count, about 50 writ petitions were filed in various high courts on topics ranged from problems in transition credit to issues with investment in tax holiday jurisdictions.