The 54th GST Council meeting, chaired by the Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, brought significant changes to India’s GST framework. Let’s dive into the key updates that will impact businesses and consumers alike.
Reduction in GST Rates on Certain Goods
- Namkeens and Extruded Savory Food Products: The GST rate on extruded or expanded savory products, such as namkeens, has been reduced from 18% to 12%. This aligns these products with other similar food items, bringing relief to manufacturers and consumers.
- Cancer Drugs: The council reduced the GST rate on critical cancer drugs like Trastuzumab Deruxtecan, Osimertinib, and Durvalumab from 12% to 5%. This move will make life-saving treatments more affordable for cancer patients.
- Metal Scrap: A Reverse Charge Mechanism (RCM) has been introduced for metal scrap, ensuring that taxes are collected efficiently. Additionally, a 2% TDS will apply on B2B supplies of metal scrap, which helps streamline taxation in the metal recycling industry.
Insurance Sector and Compensation Cess
- Life and Health Insurance: The council has constituted a Group of Ministers (GoM) to look into GST issues related to life and health insurance. Their report, due by the end of October 2024, is eagerly awaited by stakeholders.
- Future of Compensation Cess: A GoM has been formed to study the future of the compensation cess, indicating potential changes in its scope or duration.
Changes in Services
- Passenger Transport by Helicopters: For passenger transport via helicopters, the GST rate has been fixed at 5% on a seat-share basis, bringing clarity to the aviation sector. Charter services, however, will continue to attract 18% GST.
- Research and Development Services: The council exempted GST on R&D services provided by government entities, universities, and research associations, making it easier for these institutions to focus on innovation without tax burdens.
B2C e-Invoicing Pilot
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The Council has decided to roll out a pilot for B2C e-invoicing, building on the success of e-invoicing in the B2B sector. This initiative aims to improve business efficiency and allow consumers to verify their invoices, ensuring transparency in retail.
Streamlining Compliance and Refunds
- GST Refunds on Exports: The Council proposed several clarifications and changes to refund rules, including the simplification of refund procedures for exporters. The removal of certain restrictions will expedite the refund process, benefiting exporters.
- New Ledgers and Invoice Management System (IMS): Enhancements are being made to the GST return system, including the introduction of ledgers like the Reverse Charge Mechanism (RCM) ledger and the Input Tax Credit Reclaim ledger. The new IMS system will allow businesses to manage invoices more efficiently, reducing errors in ITC claims.
Clarifications on Miscellaneous Issues
- Car and Motorcycle Seats: To ensure uniformity, the GST rate on car seats has been increased from 18% to 28%, aligning them with motorcycle seats.
- Transport of Goods by Road: The council clarified that ancillary services provided during the transport of goods by road, such as loading or warehousing, will be treated as a composite supply when a consignment note is issued, streamlining the tax treatment for goods transport agencies.
GST on Real Estate and Educational Services
- Preferential Location Charges (PLC): The council clarified that PLC paid along with construction services forms part of the composite supply and will receive the same tax treatment as the main construction service.
- Affiliation Services: Educational institutions like CBSE will be taxable under GST for affiliation services, except when provided to government schools, where they are exempt.
New Relief Measures for Trade
The Council recommended a waiver of penalties and interest on certain tax demands for the fiscal years 2017-18 to 2019-20 under Section 128A of the CGST Act, provided payments are made by 31st March 2025.
Conclusion
The 54th GST Council meeting introduced several impactful changes aimed at simplifying tax procedures, making essential services more affordable, and encouraging compliance. From reductions in cancer drug taxes to the launch of B2C e-invoicing, these reforms are set to streamline India’s GST system, benefiting both businesses and consumers alike.
These changes reflect the government’s ongoing effort to fine-tune the GST framework and address emerging challenges. Stay tuned for further updates as these recommendations are implemented in the coming months.