GST Council's clarifications could spell relief for companies

Two clarifications issued by the GST Council at its Lucknow meeting are likely to provide relief to businesses. The businesses that could benefit include Indian entities like telcos, insurers and banks having operations across several states, as well as captives of foreign companies in India that deal with other overseas businesses of the mother company.

The GST Council, comprising the union finance minister and representatives from all states and UTs, decided at its meeting on Friday that the unutilized balance in CGST and IGST cash ledger would be transferred between distinct persons (with same PAN, registered across different states) without going over the refund procedure.



This would enable, according to a TOI report, businesses like insurance companies, which need separate registration across states, to utilise unclaimed credit from one state to meet its liability in another.

This facility is not, however, extended to group companies like it is in the European Union. For instance, a conglomerate cannot use its credit from its auto company for its insurance company, but can extend it to its auto business across various states.

M S Mani, senior director at consulting firm Deloitte was quoted as saying in the report that "businesses with multi-state operations will be relieved now that they'll be able to use the unutilized balance credit across states which in turn makes their working capital management efficient."

Captive businesses of MNCs like Citibank and Standard Chartered would be the other entities to heave a sigh of relief.

These companies, which use their India facility for transactions in the US or the UK, had been asked in a ruling to pay 18 percent GST on all services rendered to bodies outside India. The issue was not resolved despite the Central Board of Excise and Indirect Taxes having issued a clarification.

Abhishek Jain, tax partner at EY India, said the government has proposed to issue clarification on some other vital subjects of dispute like intermediary services.

These might be extremely relevant in resolving conflicts with BPOs and other backend global offices, he said, and could put a stop to unnecessary litigation.