GST Council’s 54th Meeting: Key Decisions on Tax Rates, Insurance, and Compliance Reforms

Desk Report, September 10, 2024: The 54th Goods and Services Tax (GST) Council meeting, chaired by Finance Minister Nirmala Sitharaman, took place at Sushma Swaraj Bhawan in New Delhi on Monday. The meeting introduced significant decisions aimed at improving GST rates, streamlining compliance, and shaping the future of GST administration.

The council recommended establishing two new Groups of Ministers (GoMs). One GoM will review GST rates on life and health insurance, with its report due by October 2024. A second GoM will focus on the compensation cess, which is set to expire in March 2026.

The council suggested exempting research and development services provided by government bodies, research associations, and educational institutions receiving public or private grants. GST rates on certain cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, will be reduced from 12% to 5%.

Following the success of B2B e-invoicing, a pilot program for Business-to-Customer (B2C) e-invoicing will be introduced. This initiative aims to boost business efficiency and transparency in the retail sector.

Changes in GST Tax Rates

Goods:

– Namkeens and Snacks: The GST rate for extruded savoury snacks will drop from 18% to 12%, aligning it with other edible items.

– Metal Scrap: A Reverse Charge Mechanism (RCM) will apply to metal scrap transactions from unregistered to registered sellers, with a 2% TDS on B2B deals.

– Railway Air Conditioning Units: GST on Roof Mounted Package Unit (RMPU) air conditioners for railways will be taxed at 28%.

– Car Seats: The rate for car seats will increase from 18% to 28%, matching the tax rate for motorcycle seats.

Services:

– Helicopter Transport: Passenger transport by helicopter will attract 5% GST on a seat-sharing basis, while charter services remain at 18%.

– Flying Courses: GST on DGCA-approved flying training courses will be exempt.

– Affiliation Services: Educational board affiliation services will be taxed, with exemptions applying prospectively to government schools.

The council approved waiving interest or penalties on tax demands for FY 2017-18 to FY 2019-20. To benefit, taxpayers must make payments by March 31, 2025. A new process will be introduced to correct past orders where input tax credits were wrongly denied due to outdated regulations.

Several clarifications will be issued on topics including advertising services for foreign clients, input tax credits for demo vehicles, and data hosting services.

The GST Council announced enhancements to the GST return architecture, introducing new ledgers for Reverse Charge Mechanism (RCM) and Input Tax Credit (ITC) reclaiming. Taxpayers can declare their opening balances by October 31, 2024. Additionally, past GST liabilities related to film distribution, transportation services, and electricity services will be regularized.

The 54th GST Council meeting laid the groundwork for substantial changes in GST administration, with reforms aimed at easing compliance and providing relief to several sectors.

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