Key Highlights from the 54th GST Council Meeting
The 54th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, took place in New Delhi with several important recommendations that aim to streamline tax compliance, reduce rates on key products, and address several sectors' needs. Below are the major outcomes and recommendations from the meeting.
GST Rate Reductions
The council proposed several changes in tax rates to provide relief to various sectors:
- Namkeens and Savoury Food Products: The GST on extruded or expanded food products (like savoury snacks) was reduced from 18% to 12%, aligning it with the tax on similar ready-to-consume items such as namkeens, bhujia, and mixtures. Unfried or uncooked snack pellets will continue to attract a 5% GST rate.
- Cancer Drugs: Life-saving cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, saw a GST reduction from 12% to 5%, making these essential treatments more affordable.
- Metal Scrap: The council introduced a Reverse Charge Mechanism (RCM) for metal scrap supplies by unregistered persons to registered persons. A TDS of 2% will be applicable on B2B metal scrap supplies, encouraging better tax compliance.
- Car and Motorbike Seats: Car seats were clarified to be classified under HSN 9401, and the GST rate was increased from 18% to 28%, bringing it in line with motorcycle seat taxation.
Changes in Services Sector Taxation
Several important changes were made concerning services, impacting sectors ranging from aviation to education:
- Life and Health Insurance: A Group of Ministers (GoM) was formed to study GST-related issues in the life and health insurance sectors. This GoM will submit its report by October 2024.
- Passenger Transport via Helicopter: A 5% GST rate was introduced for the transport of passengers by helicopter on a seat-sharing basis, regularizing past tax periods. Charter services will continue to be taxed at 18%.
- Flying Training Courses: Approved flying training courses conducted by Directorate General of Civil Aviation (DGCA)-approved organizations are now exempt from GST.
- Research & Development Services: Supplies of research services by government entities or research associations funded by government or private grants were exempted from GST, providing financial relief for scientific research institutions.
B2C e-Invoicing Pilot
A pilot for B2C e-Invoicing will be introduced following the success of B2B e-invoicing. This aims to enhance business efficiency, reduce fraud, and ensure transparency in retail transactions. The initiative will initially roll out on a voluntary basis in selected states and sectors, allowing customers to verify the GST invoice submitted in the return.
Compensation Cess
The council formed a GoM to study the future of the compensation cess, which was introduced to compensate states for revenue losses following the GST implementation. The GoM is expected to explore avenues for extending the cess or developing alternative revenue mechanisms.
Regularization of GST on Ancillary Services
The council clarified that when ancillary services like loading, unloading, packing, and warehousing are part of goods transportation by a Goods Transport Agency (GTA), they form a composite supply and will attract GST at the same rate as the main service. This clarification is intended to resolve disputes and simplify tax compliance.
Other Key Changes
- Preferential Location Charges (PLC): PLCs paid alongside consideration for construction services before the issuance of a completion certificate will be treated as part of a composite supply. The tax treatment of PLCs will follow the main service, which is the construction service.
- Import of Services by Foreign Airlines: Import of services by branch offices of foreign airlines from their related entities outside India, when made without consideration, will be exempt from GST.
- Electricity Services: GST will be exempted for various services related to providing electricity, such as application fees for new connections, meter rentals, and testing fees, when offered as part of a composite supply by transmission and distribution utilities.
- Affiliation Services: Affiliation services provided by state and central educational boards to government schools will be exempt from GST. However, the same services to private educational institutions will remain taxable at 18%.
Trade Facilitation Measures
- Waiver of Interest and Penalties: The council recommended inserting a procedure for the waiver of interest and penalties concerning tax demands for financial years 2017-18, 2018-19, and 2019-20 under the CGST Act. Taxpayers must settle their dues by 31st March 2025 to benefit from this relief.
- Invoice Management System: A new Invoice Management System (IMS) will allow taxpayers to accept, reject, or keep invoices pending for input tax credit claims, helping avoid mismatches and reducing compliance issues.
Conclusion
The 54th GST Council meeting brought forward a range of important changes aimed at improving compliance, streamlining processes, and offering relief across sectors like healthcare, research, education, and aviation. The introduction of B2C e-invoicing, reduced GST rates on life-saving drugs, and facilitation measures for taxpayers indicate the government’s focus on balancing compliance with ease of doing business in India. As these recommendations are implemented, stakeholders should closely monitor changes to ensure they align with the updated regulatory framework.
These decisions, once notified through appropriate circulars and law amendments, will come into full force, marking another step toward refining the GST system in India.
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