54th GST Council Meeting
54th GST Council Meeting
On 9th September 2024, the 54th GST Council meeting was held in New Delhi, under the Chairpersonship of Finance Minister Smt. Nirmala Sitharaman. The various decisions are made from this meeting, including GST tax rate adjustments, trade facilitation measures, and streamlining compliance. The key ministers from Goa, Bihar, Madhya Pradesh, Telangana, etc, attended this meeting. The recommendations proposed during the 54th GST Council meeting considerably impact various sectors, including healthcare and transport, signalling important GST compliance and regulations reforms. This article details the event of the 54th GST Council Meeting and the recommendations.
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Get Started!Highlights of the 54th GST Council Meeting
- Namkeens and Savory Food Products: The GST rate on extruded/expanded savory food products has been reduced from 18% to 12%.
- Cancer Drugs: The GST rate on certain cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, has been reduced from 12% to 5%.
- Roof Mounted Package Units (RMPU): It has been clarified that RMPU air conditioning units for railways attract a 28% GST rate under HSN 8415.
- Metal Scrap: A Reverse Charge Mechanism (RCM) has been introduced for metal scrap transactions from unregistered suppliers.
- Life and Health Insurance: A Group of Ministers (GoM) has been formed to review the GST treatment of life and health insurance comprehensively. The GoM will submit its recommendations by October 2024.
- Research and Development: The supply of research and development services by government entities, universities, and research institutions has been exempted from GST.
- Helicopter Services: The GST rate for passenger transport via helicopter (seat share basis) has been reduced to 5%, while charter services will continue to attract an 18% GST rate.
- Commercial Property Rent: RCM has been introduced for commercial property rentals from unregistered to registered persons.
- GST Penalty Waivers: Special procedures for waiving penalties and interest for tax demands during 2017-18, 2018-19, and 2019-20 have been introduced.
- B2C E-invoicing: A pilot project for B2C e-invoicing will be launched on a voluntary basis in selected sectors and states.
- New Ledgers and Invoice Management: New RCM, ITC Reclaim ledgers, and an Invoice Management System have been introduced for taxpayers.
Recommendations During 54th GST Council Meeting
During the 54th GST Council Meeting, the following recommendations are made,
Changes or Clarifications on Goods GST Tax Rates:
Below, find the series of changes and clarifications made on the GST tax rates for goods,
Namkeens and Extruded/Expanded Savory Food Products
The GST rate for extruded or expanded savoury food products (excluding un-fried or un-cooked snack pellets) has been reduced from 18% to 12%. This aligns the tax rate with similar products like namkeens, bhujia, mixture, and chabena. However, un-fried or uncooked snack pellets will continue to be taxed at a lower rate of 5%. This change is effective prospectively.
Cancer Drugs
The GST rate on certain cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, has been reduced from 12% to 5%. This relieves patients and their families by lowering the cost of these essential medications.
Metal Scrap
A Reverse Charge Mechanism (RCM) has been introduced to supply metal scrap by unregistered persons to registered persons. This means the registered recipient will be responsible for paying the GST, even if the supplier is below the registration threshold. Additionally, a TDS of 2% will be applicable on the supply of metal scrap by registered persons in B2B transactions.
Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways
It has been clarified that RMPU air conditioning machines for railways fall under HSN 8415 and are subject to a GST rate of 28%.
Car and Motorcycle Seats
Car seats have been classified under 9401 and will now attract a GST rate of 28%. This increase is equivalent to the GST rate on motorcycle seats, which is also 28%. The higher rate will apply prospectively to car seats of motor cars.
Changes or Clarifications on Services GST Tax Rates:
In this section, we are given the changes and clarification made on the services GST rates during the GST council meeting,
Life and Health Insurance
The GST Council has recommended forming a Group of Ministers (GoM) to examine the GST implications for life and health insurance comprehensively. The GoM will consist of representatives from various states and is expected to submit its report by the end of October 2024.
Transport of Passengers by Helicopters
The GST rate for transporting passengers by helicopters on a seat-sharing basis has been reduced to 5%. Additionally, the GST for past periods will be regularized on an “as is where is” basis. However, chartering a helicopter will continue to attract an 18% GST rate.
Flying Training Courses
It has been clarified that approved flying training courses conducted by DGCA-approved Flying Training Organizations (FTOs) are exempt from GST.
Research and Development Services Supply
The GST Council has recommended exempting the supply of research and development services by government entities or notified research institutions when using government or private grants. Past demands related to these services will be regularised on an “as is where is” basis.
Preferential Location Charges (PLC)
Location charges or PLCs paid for construction services before the issuance of a completion certificate will now be considered part of the composite supply. This means they will be subject to the same GST rate as the main construction service.
Affiliation Services
Affiliation services provided by educational boards like CBSE will be taxable. However, affiliation services provided by state/central educational boards to government schools will be exempt prospectively. Past demands will be regularised on an “as is where is” basis.
Import of Services by Branch Office
The import of services by a foreign airline company’s establishment from a related person or its establishment outside India, when made without consideration, will be exempt from GST. Past periods will be regularised on an “as is where is” basis.
Renting of Commercial Property
Renting of commercial property by unregistered persons to registered persons will be brought under the Reverse Charge Mechanism (RCM) to prevent revenue leakage.
Ancillary/Intermediate Services Provided by Goods Transport Agency (GTA)
When a Goods Transport Agency (GTA) provides ancillary/intermediate services in the course of transporting goods by road, and the GTA also issues a consignment note, the service will constitute a composite supply. These ancillary services will be treated as part of the composite supply and subject to the same GST rate. However, if these services are provided separately and not in the course of transportation, they will not be considered as part of the composite supply.
Trade Facilitation Measures:
Recommendations focused on trade facilitation are given below,
Waiver of Interest and Penalty for Tax Demands
The GST Council has recommended the insertion of Rule 164 in the CGST Rules, 2017, to provide a procedure and conditions for waiving interest or penalty on tax demands under Section 73 of the CGST Act for the financial years 2017-18, 2018-19, and 2019-20. This waiver can be availed under Section 128A of the CGST Act. The Council has also recommended notifying the deadline for making tax payments to avail this benefit as 31st March 2025.
Implementation of Newly Inserted Subsections in Section 16 of the CGST Act
The GST Council has recommended the notification of Sections 118 and 150 of the Finance (No. 2) Act, 2024, which insert subsections (5) and (6) into Section 16 of the CGST Act retrospectively from 1st July 2017. A special procedure for rectifying orders related to wrong availment of input tax credit will be notified under Section 148 of the CGST Act.
Amendments to CGST Rules and Clarifications on IGST Refunds
The GST Council has recommended clarifying that IGST paid on exports, refunded to exporters who initially imported inputs without paying integrated tax and compensation cess, will not be considered in contravention of the provisions of sub-rule (10) of Rule 96 of the CGST Rules.
To simplify the refund procedure for exports where concessional/exemption notifications are availed on the inputs, the Council has recommended omitting Rule 96(10), Rule 89(4A), and Rule 89(4B) from the CGST Rules prospectively.
Issuance of Clarifications
The GST Council has recommended issuing circulars to provide clarity and remove ambiguities in certain areas, such as the place of supply of advertising services provided by Indian advertising companies to foreign entities, the availability of input tax credit on demo vehicles, and the place of supply of data hosting services.
Implementation of B2C E-invoicing:
The GST Council has recommended a pilot rollout for B2C e-invoicing, building upon the successful implementation of GST e-invoicing in B2B transactions. Recognising the potential benefits of e-invoicing in the retail sector, such as improved business efficiency, environmental sustainability, and cost reduction, the Council believes this pilot will contribute to a more streamlined and transparent invoicing process. Additionally, it will empower retail customers to verify the accuracy of invoices reported in GST returns. The pilot will be implemented voluntarily in select sectors and states.
Introduction of New Ledgers and IMS:
The GST Council made recommendations for enhancing 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 can declare their opening balances for these new ledgers by October 31, 2024.
The IMS will empower taxpayers to accept, reject, or keep invoices pending to avail of input tax credit. This optional facility is designed to reduce errors in input tax credit claims and improve reconciliation, thereby minimising the issuance of notices due to ITC mismatches in returns.
Other Measures & Changes:
The GST Council has approved measures to regularise the GST liability for the past period prior to October 1, 2021, for film distributors or sub-distributors acting as principals in acquiring and distributing films. Additionally, the Council has recommended exempting certain services related to electricity supply, such as application fees, rental charges, testing fees, and labour charges, when provided as a composite supply. The GST for the past period related to these services will also be regularised on an “as is where is” basis.
Conclusion
The 54th GST Council Meeting, held in September 2024, introduced significant changes to the Goods and Services Tax (GST) regime. Key highlights include reduced GST rates for certain food products and cancer drugs, trade facilitation measures like the Reverse Charge Mechanism, and sector-specific reforms for healthcare and transport. The meeting also focused on improving taxpayer compliance through new ledgers and an Invoice Management System. Overall, these recommendations demonstrate the government’s commitment to enhancing the GST regime and benefiting businesses and consumers across various sectors.
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