The 'as is where is basis' GST puzzle

‘As is where is basis’ is a phrase normally used in auctions. The phrase appears to have caught the fancy of the GST Council since its 53rd meeting. In its recommendations in the latest meeting, the council used the phrase almost half a dozen times.

The transport of passengers by helicopters on a seat-share basis will attract a GST of 5%. The council has also proposed exemptions on many services such as the supply of research and development services by a government entity or a research association, university, college or other institution using government or private grants. 

This decision was prompted by a demand of Rs 120 crore raised by the GST department against IIT Delhi. Affiliation services provided by state/central educational boards, educational councils and other similar bodies to government schools also get an exemption. The import of services by an establishment of a foreign airline company from a related person or any of its establishments outside India, when made without consideration, attracts no GST.  

A film distributor or sub-distributor acting on a principal basis to acquire and distribute films has also been given an exemption. Services that are incidental, ancillary or integral to the transmission and distribution of electricity by utilities to their consumers, when provided as a composite supply, are also proposed to be exempted.

For all the above transactions, the GST Council has recommended that all past transactions be “regularised on as is where is basis”.

With no guidance as to what this phrase means, taxpayers would be hoping that GST officers do not interpret this to mean that the exemption is only prospective, resulting in taxes having to be paid on all past transactions. The Central Board of Indirect Taxes and Customs (CBIC) would do well to issue instructions to field officers on how to conclude assessments based on the “as is where is basis”. 

It was expected that, at the 54th meeting of the GST Council, a final call would be taken on two long-debated transactions — tax on online gaming and insurance services.

The council chose to maintain a stoic silence regarding online gaming and decided to form a Group of Ministers (GoM) to provide recommendations on GST on health and life insurance. The GoM is quite large — the members are Bihar, Uttar Pradesh, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat. It is apparent that the council decided to include representatives from states where the ruling party is not in power to prevent accusations of bias. It remains to be seen whether the representatives from 13 states can come up with a solution for GST on health and life insurance in 50 days. 

The GST Council recommended changes in GST rates on an eclectic range of items from namkeens to cancer drugs and car seats. Its 53rd meeting introduced Section 128A in GST laws, which provided for the waiver of interest and penalties levied on specific orders. However, the interpretation of this section led to more questions than solutions.

As a follow-up, the 54th meeting recommended the insertion of rule 164 in CGST Rules, 2017, along with certain forms, providing for the procedure and conditions for availing the benefit of waiver of interest or penalty or both related to tax demands under section 73 of the CGST Act, pertaining to FYs 2017-18, 2018-19 and 2019-20, as per section 128A of the CGST Act. To avail this benefit of waiver, the tax component has to be paid on or before March 31, 2025. Taxpayers should brace for some more circulars and forms. Buoyed by the success of the e-invoicing mechanism, the GST Council has recommended the rollout of a pilot for B2C e-Invoicing.

The council also appointed another GoM to look into the issue of compensation cess — a levy that was introduced to compensate states for their loss of GST revenues. When introduced, the cess had a sunset date of June 2022 which has been extended to March 2026. A few state governments such as Karnataka have complained that they have been short-changed on the compensation cess since what was due has not been paid to them. Some state governments have protested that the percentage of tax (approximately 41%) to be passed on to them as recommended by the Finance Commission has reduced by almost 10 decimal points. 

GST laws are at a phase where one can only expect a tinkering of the existing provisions. Radical changes such as reducing the GST slabs to only a few and bringing fuel and alcoholic liquor for human consumption under the GST umbrella seem highly unlikely in the near future.  

(The writer is a Bengaluru-based tax expert)