The Central Board of Indirect Taxes and Customs (CBIC) is drafting rules to operationalise Section 11A of the CGST Act, a provision that allows the government, on the GST Council’s recommendation, to waive tax dues for an industry in exceptional cases, according to two government sources familiar with the matter.
“We are in the process of framing rules. Once framed, the Council and the CBIC may invoke the provisions whenever required to grant relief to the industry from past unpaid GST liabilities,” one of the people cited above said, requesting anonymity.
Section 11A of the CGST Act gives the central government, on the recommendation of the GST Council, the power to waive off past GST liabilities of the industry for a particular period if it is satisfied that the non-payment or under-payment of taxes was due to a “generally prevalent trade practice”.
The clause was introduced through the Finance Act, 2024, following representations from the online gaming industry seeking relief from retrospective tax demands.
Section 11A overrides all other standard recovery, demand, and penalty provisions in the GST law. To invoke this section, the GST Council must be satisfied that a specific non-payment occurred because of a widely accepted, prevalent trade practice across a sector, rather than deliberate evasion by an individual firm.
‘No relief planned for online gaming industry yet’
The government sources said the GST Council may discuss using the provision to provide relief to the online gaming industry at its next meeting in July or August, though no final decision is expected. The sector faces tax demands exceeding Rs 1 lakh crore following a Supreme Court ruling last month.
“A final call may not be taken in the next meeting,” the second person said, also requesting anonymity.
The Supreme Court on May 27 upheld the constitutional validity of the 28 percent GST levy on online gaming transactions, as well as the government’s retrospective imposition of the levy on the firms. The online gaming industry had appealed these notices in the court on legal and constitutional grounds even as they expressed their inability to pay these dues, since their revenues were far lower than the tax demands.
“The Supreme Court has ruled on online gaming in favour of the government. Whether Section 11A could be considered by the GST Council? We don’t know yet. That provision does empower the government to waive tax demands retrospectively in certain situations,” the second person said.
“I understand concerns have been raised because some of the notices are larger than the companies’ worth. But at this stage, I can’t say Section 11A will be invoked specifically for the online gaming sector,” the person added.
