The 54th GST Council meeting, chaired by Union Minister of Finance Smt. Nirmala Sitharaman, took place in New Delhi, offering several important recommendations for rate rationalization, compliance measures, and trade facilitation. These changes are pivotal for both businesses and individual taxpayers, ensuring smoother GST operations. In this blog, we explore the major decisions taken at the meeting, including GST rate changes, service exemptions, and policy updates.
Key Recommendations from the 54th GST Council Meeting
1. Life and Health Insurance GST Review
The GST Council has formed a Group of Ministers (GoM) to examine GST issues related to life and health insurance. This GoM, consisting of representatives from various states, will submit its findings by the end of October 2024. The objective is to streamline the taxation process for insurance services, ensuring fairness and clarity.
2. Compensation Cess Study
A new GoM has been created to study the future of compensation cess. This is crucial, as compensation cess is currently used to bridge the gap between GST collections and the revenue shortfall for states.
3. Exemption for R&D Services
One of the major highlights of the meeting is the exemption of GST on research and development services provided by government entities, universities, and research associations funded by both government and private grants. This move is aimed at promoting research activities in India.
4. Reduction in GST Rates on Cancer Drugs
Recognizing the importance of affordable healthcare, the GST Council reduced the GST rates on critical cancer drugs, such as Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, from 12% to 5%. This decision will make these life-saving medicines more accessible to patients.
5. Introduction of B2C E-Invoicing Pilot
The GST Council has approved a pilot project for e-invoicing in the B2C sector. Following the success of e-invoicing in the B2B sector, this pilot aims to bring more transparency and efficiency to retail transactions, ultimately benefiting consumers and businesses alike.
6. Namkeens and Extruded/Expanded Savoury Food Products
GST on extruded or expanded savoury food products, like namkeens, has been reduced from 18% to 12%, aligning it with similar snack products. The GST Council also clarified that this reduction is applicable prospectively.
7. GST on Metal Scrap
To prevent revenue leakage in the metal scrap industry, the Council introduced a Reverse Charge Mechanism (RCM) on the supply of metal scrap by unregistered persons to registered recipients. Additionally, a 2% TDS will apply to registered suppliers in B2B transactions.
8. GST on Life Insurance and Health Insurance
A GoM has been formed to address GST issues related to life and health insurance, with recommendations expected by the end of October 2024.
9. Passenger Transport by Helicopters
The Council recommended a 5% GST rate on the transport of passengers by helicopters on a seat-share basis, while charter services will continue to attract 18% GST. The decision also aims to regularize past GST demands in this sector.
10. Flying Training Courses Exemption
Approved flying training courses conducted by DGCA-approved Flying Training Organizations (FTOs) have been exempted from GST, ensuring that aspiring pilots can access cost-effective training.
11. Clarifications on Preferential Location Charges (PLC)
The Council clarified that Preferential Location Charges (PLC), when paid with consideration for construction services, will be treated as part of the composite supply. This clarification helps in determining the correct tax treatment for real estate services.
12. Taxability of Affiliation Services
Affiliation services provided by educational boards like CBSE are taxable, but services provided to government schools by state and central boards will be exempt going forward. The past period (from July 2017 to June 2021) will be regularized on an ‘as-is-where-is’ basis.
Conclusion
The 54th GST Council meeting brought significant changes that will impact various industries, including healthcare, education, research, and real estate. The Council’s decisions aim to simplify GST compliance, reduce tax rates on essential services, and promote transparency in transactions. Businesses and taxpayers should stay updated with the upcoming circulars and notifications to implement these changes effectively.