NEW DELHI: New Delhi: GST Council, led by finance minister Nirmala Sitharaman, on Monday announced tax exemption for research funding for higher educational institutions and research centres established under central or state laws, as well as institutions that enjoy income tax exemption.
At the meeting, the Centre proposed the change, which states accepted with West Bengal being the first to concur with the move.
The decision was prompted by Prime Minister Narendra Modi, who questioned notices sent to seven institutions on research grants, in light of govt’s efforts to boost R&D by allocating funds for research through the budget and creation of the National Research Foundation, Sitharaman told reporters after the meeting.
She clarified that the notices were not an attempt at “tax terrorism” but a matter of interpretation by officers, who wanted to do their job properly, as some research funding had a component that could be perceived as a “quid pro quo arrangement”.
Sitharaman said that irrespective of whether the funding is from private or public sources, there will be no GST irrespective on the arrangement. “Research funding may eventually lead to development of patents or climate-resistant seed varieties, and therefore, it should not bear the GST burden,” Sitharaman said.
Multiple institutions including IIT-Delhi and state universities such as Anna University, Chennai received GST notices. As reported by TOI, last month, IIT-Delhi received a show-cause notice from the Directorate General of Goods and Services Tax (GST) Intelligence, demanding Rs 120 crore in GST on research grants it received between 2017 and 2022.
Revenue secretary Sanjay Malhotra said that the tax claim will be “regularised”.
The decision came along with a clarification for foreign airlines where GST will be exempt on import of services from a related person or any of its establishments outside India, which comes without any consideration.
Asked about notices to companies such as those sent to Infosys for transactions with branches, Malhotra said that a clarification issued in June dealt with the issue. The Indian IT major had received a Rs 32,000 crore notice from DG GST Intelligence a part of which has been closed with demands for remaining years also expected to be dropped based on the clarification.
At the meeting, the Centre proposed the change, which states accepted with West Bengal being the first to concur with the move.
The decision was prompted by Prime Minister Narendra Modi, who questioned notices sent to seven institutions on research grants, in light of govt’s efforts to boost R&D by allocating funds for research through the budget and creation of the National Research Foundation, Sitharaman told reporters after the meeting.
She clarified that the notices were not an attempt at “tax terrorism” but a matter of interpretation by officers, who wanted to do their job properly, as some research funding had a component that could be perceived as a “quid pro quo arrangement”.
Sitharaman said that irrespective of whether the funding is from private or public sources, there will be no GST irrespective on the arrangement. “Research funding may eventually lead to development of patents or climate-resistant seed varieties, and therefore, it should not bear the GST burden,” Sitharaman said.
Multiple institutions including IIT-Delhi and state universities such as Anna University, Chennai received GST notices. As reported by TOI, last month, IIT-Delhi received a show-cause notice from the Directorate General of Goods and Services Tax (GST) Intelligence, demanding Rs 120 crore in GST on research grants it received between 2017 and 2022.
Revenue secretary Sanjay Malhotra said that the tax claim will be “regularised”.
The decision came along with a clarification for foreign airlines where GST will be exempt on import of services from a related person or any of its establishments outside India, which comes without any consideration.
Asked about notices to companies such as those sent to Infosys for transactions with branches, Malhotra said that a clarification issued in June dealt with the issue. The Indian IT major had received a Rs 32,000 crore notice from DG GST Intelligence a part of which has been closed with demands for remaining years also expected to be dropped based on the clarification.
