The 54th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman on September 9, 2024, addressed significant issues related to tax reforms, compliance and trade facilitation. Held in New Delhi, the meeting saw participation from key state finance ministers and union representatives. Among the notable outcomes were adjustments in GST rates on essential goods, including a reduction in tax on critical cancer drugs and a focus on easing compliance procedures for businesses.
Key decisions included reducing GST on specific extruded snack items and cancer medications, clarifying tax applicability on services, and simplifying export refund processes. The Council also introduced a reverse charge mechanism (RCM) for metal scrap suppliers and resolved issues regarding input tax credits. These updates aim to streamline trade processes and offer more clarity on tax regulations.
Recommendations from 54th meeting of the GST Council
- GST Council recommends Group of Ministers (GoM) on life and health insurance related GST with existing GoM on rate rationalization; to submit report by end of October 2024.
- GST Council also recommends formation of a Group of Ministers (GoM) to study the future of compensation cess.
- GST Council recommends to exempt supply of research and development services by a government Entity; or a research association, university, college or other institution notified u/s 35 of Income Tax Act using government or private grants.
- GST Council recommends reduction in GST rates on cancer drugs - Trastuzumab Deruxtecan, Osimertinib and Durvalumab from 12% to 5%.
- GST Council recommends roll out of a pilot for B2C E-Invoicing.
Impact on Goods GST rates from GST council meet :
- The GST rate of expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 (article description for corn chips) to be reduced from 18% to 12% at par with namkeens, bhujia, mixture, chabena (pre-packaged and labelled) and similar edible preparations in ready for consumption form which are classifiable under HS 2106 90 (article description for namkeens, bhujia, mixture, chabena) The GST rate of 5% will continue on un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion.
- To also clarify that the reduced GST rate of 12% on extruded or expanded products, savoury or salted(other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through process of extrusion), falling under HS 1905 90 30 (article description for Bread, pastry, cakes, biscuits and similar baked products, and puddings) is applicable prospectively.
1. Namkeens and expanded savoury food products
2. Cancer drugs :
- The GST rate on cancer drugs namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab to be reduced from 12% to 5%.
3. Metal scrap :
- Reverse Charge Mechanism (RCM) to be introduced on supply of metal scrap by unregistered person to registered person provided that the supplier shall take registration as and when it crosses threshold limit and the recipient who is liable to pay under RCM shall pay tax even if supplier is under threshold.
- A TDS of 2% will be applicable on supply of metal scrap by registered person in B-to-B supply.
4. Roof mounted package unit (RMPU) air conditioning machines for railways
- To clarify that Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways would be classified under HSN 8415 attracting a GST rate of 28% .
5. Car and motor cycle seats
- To clarify, car seats are classifiable under 9401 and attract a GST rate of 18%.
- The GST rate on car seats classifiable under 9401 to be increased from 18% to 28%. This uniform rate of 28% will be applicable prospectively for car seats of motor cars to bring parity with seats of motorcycles which already attract a GST rate of 28%.
Impact on Services GST rates from GST council meet :
1. Life and health insurance
- GST Council recommended to constitute a Group of Ministers (GoM) to holistically look into the issues pertaining to GST on the life insurance and health insurance. The GoM members are Bihar, UP, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat. The GoM is to submit the report by end of October 2024.
2. Transport of passengers by helicopters
- To notify GST @ 5% on the transport of passengers by helicopters on seat share basis and to regularize the GST for past period on ‘as is where is’ basis. To also clarify that charter of helicopter will continue to attract 18% GST.
3. Flying training courses
- To clarify by way of a circular that the approved flying training courses conducted by DGCA approved, Flying Training Organizations (FTOs) are exempt from the levy of GST.
4. Supply of research and development services
- The GST Council recommended to exempt supply of research and development services by a government Entity; or a research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 using government or private grants.
- Past demands to be regularised on ‘as is where is’ basis.
5. Preferential location charges (PLC)
- To clarify that location charges or preferential location charges (PLC) paid along with the consideration for the construction services of residential/commercial/industrial complex before issuance of completion certificate forms part of composite supply where supply of construction services is the main service and PLC is naturally bundled with it and are eligible for same tax treatment as the main supply that is, construction service.
6. Affiliation services
- To clarify, affiliation services provided by educational boards like CBSE are taxable. However, to exempt affiliation services provided by State/Central educational boards, educational councils and other similarly placed bodies to government schools prospectively. The issue for the past period between 01.07.2017 to 17.06.2021 to be regularized on ‘as is where is’ basis.
- To clarify by way of circular that the affiliation services provided by universities to their constituent colleges are not covered within the ambit of exemptions provided to educational institutions in the notification No. 12/2017-CT(R) dated 28.06.2017 and GST at the rate of 18% is applicable on the affiliation services provided by the universities.
7. Import of service by branch Office
- To exempt import of services by an establishment of a foreign airlines company from a related person or any of its establishment outside India, when made without consideration. The council also recommended to regularise the past period on ‘as is where is’ basis.
8. Renting of commercial property
- To bring renting of commercial property by unregistered person to a registered person under Reverse Charge Mechanism (RCM) to prevent revenue leakage.
9. Ancillary/intermediate services are provided by Goods transport agency (GTA)
- To clarify that when ancillary/intermediate services are provided by GTA in the course of transportation of goods by road and GTA also issues consignment note, the service will constitute a composite supply and all such ancillary/intermediate services like loading/unloading, packing/unpacking, transshipment, temporary warehousing etc. will be treated as part of the composite supply. If such services are not provided in the course of transportation of goods and invoiced separately, then these services will not be treated as composite supply of transport of goods
Other aspects discussed in GST council meet :
1. B2C E-Invoicing :
The GST Council recommended the roll out of a pilot for B2C E-Invoicing, following the successful implementation of E-Invoicing in the B2B sector. The Council recognized potential benefits of E-Invoicing in retail, such as improved business efficiency, environmentally friendly, cost efficiency to the business, etc.
It would also provide an opportunity for the retail customers to verify the reporting of the invoice in the GST return. The pilot will be rolled out on voluntary basis in selected sectors and States.
2. Invoice management system and new ledgers :
The Council also took note of the agenda on the enhancements being made to the existing GST return architecture. These enhancements include the introduction of a Reverse Charge Mechanism (RCM) ledger, an input tax credit reclaim ledger and an invoice management system (IMS). Taxpayers would be given the opportunity to declare their opening balance for these ledgers by 31st October 2024.
IMS will allow the taxpayers to accept, reject, or to keep the invoices pending for the purpose of availment of input tax credit. This will be an optional facility for taxpayers to reduce errors in claiming input tax credit and improve reconciliation. This is expected to reduce notices issued on account of ITC mismatch in the returns.
In the next blog we will have a detailed information on the IMS which is starting from 1st of October 2024. Stay Tuned!
References :
GST Government Portal(gst.gov.in)
Recommendations during 54th meeting of GST Council (taxguru.in)