54th GST Council Meeting Updates

Summary of 54th GST Council Meeting Updates:

The GST Council has proposed a series of significant changes, aimed at modifying tax rates, providing relief, facilitating trade, and streamlining compliance under GST. These changes cover a broad spectrum of sectors including goods, services, and compliance measures.

Key Changes in GST Tax Rates:

Goods:

1. Namkeens and Extruded Food Products: The GST rate on extruded or expanded savoury products is reduced from 18% to 12%, aligning with other namkeens and ready-to-eat snacks. Unfried or uncooked snack pellets will continue to be taxed at 5%.
2. Cancer Drugs: The GST rate on critical cancer drugs such as Trastuzumab Deruxtecan, Osimertinib, and Durvalumab is reduced from 12% to 5%, offering cost relief for patients.
3. Metal Scrap: Reverse Charge Mechanism (RCM) will apply to the supply of metal scrap from unregistered suppliers to registered buyers. Additionally, a 2% TDS will apply on B2B metal scrap transactions.
4. Roof-Mounted Package Unit (RMPU) Air Conditioners for Railways: A clarification was issued classifying RMPU air conditioners under HSN code 8415 with a 28% GST rate.
5. Car and Motorcycle Seats: GST on car seats will be increased from 18% to 28%, ensuring parity with the rate on motorcycle seats. This uniform rate will apply prospectively.

Services:

1. Life and Health Insurance: A Group of Ministers (GoM) has been tasked with reviewing GST on life and health insurance policies. The GoM will include members from multiple states and is expected to submit its report by October 2024.
2. Passenger Transport via Helicopters: A reduced GST of 5% will apply to helicopter passenger transport on a seat-sharing basis. Charter helicopter services will continue to attract an 18% GST.
3. Flying Training Courses: Flying training courses approved by the Directorate General of Civil Aviation (DGCA) are exempted from GST.
4. Research & Development Services: R&D services provided by government entities, universities, or institutions funded by government or private grants are now exempted from GST.
5. Preferential Location Charges (PLC): PLC charges, when bundled with construction services, will be treated as part of a composite supply and taxed in line with the main construction service.
6. Affiliation Services: Affiliation services provided by educational boards such as CBSE will now be taxable, but services to government schools will be exempt prospectively. Clarifications also confirm that university-to-college affiliation services are taxable at 18%.

Additional Measures to Facilitate Trade and Streamline Compliance:

1. Waiver of Interest and Penalty for Past Years: A new rule (Rule 164) will provide the procedure for waiving interest or penalties for tax demands raised under Section 73 for the financial years 2017-18, 2018-19, and 2019-20. Taxpayers can avail this waiver if the tax dues are paid by March 31, 2025.
2. Input Tax Credit (ITC) Adjustments: New mechanisms will be introduced for rectifying incorrect ITC claims under Section 16(5) and 16(6) of the CGST Act. This includes a special procedure for rectifying past orders where ITC was wrongfully availed but is now permissible.
3. Amendments to Refund Procedures: Clarifications will be issued for IGST refund claims where input tax concessions were originally availed but later rectified by paying the applicable tax. The Council also recommended omitting rules restricting refunds on exports for inputs availed under concessional notifications, thereby simplifying the refund process.
4. Circulars for Legal Clarity: To reduce ambiguity and legal disputes, circulars will be issued on key issues such as:
   • Place of supply for advertising services to foreign entities.
   • ITC eligibility on demo vehicles used by automobile dealers.
   • Place of supply for data hosting services provided to foreign cloud service providers.

Modernization Initiatives and Digitalization:

1. B2C E-Invoicing Pilot: Building on the success of B2B e-invoicing, the GST Council has proposed a pilot for B2C e-invoicing in selected sectors and states. This move aims to improve efficiency, reduce costs, and provide customers with a means to verify invoices. The pilot is voluntary and will focus on enhancing transparency in retail transactions.
2. Invoice Management System (IMS) and New Ledgers: To further enhance the GST return framework, an Invoice Management System (IMS) will be introduced, allowing taxpayers to accept, reject, or keep invoices pending to streamline ITC claims. Additionally, new ledgers for Reverse Charge Mechanism (RCM) and Input Tax Credit Reclaim will help reduce mismatches and improve compliance accuracy.

Conclusion:

The GST Council’s recommendations cover a comprehensive range of updates that not only revise tax rates but also introduce measures to streamline compliance, support trade, and enhance transparency through digitalization. With targeted reductions in GST for critical goods such as cancer drugs and a focus on facilitating business processes through e-invoicing and improved ITC reconciliation, these changes are expected to benefit both businesses and consumers, while addressing the need for tax clarity and compliance.