Overview Of The 54th GST Council Meeting
The 54th GST Council meeting, held on 9th September 2024 under the leadership of Union Finance Minister Nirmala Sitharaman, brought forward several important decisions related to tax rate adjustments, trade facilitation measures, and compliance streamlining. Attended by key ministers, including Finance Ministers of states and Union Territories, this meeting aimed to ease tax-related burdens on individuals and businesses while pushing forward reforms in GST compliance.
The recommendations made in this meeting have significant implications for a wide range of sectors, from healthcare to transport, potentially reshaping the way businesses and individuals interact with GST regulations.
Key Recommendations From The 54th GST Council Meeting
1. Life and Health Insurance: Formation of a Group of Ministers (GoM)
The Council has set up a Group of Ministers (GoM) to thoroughly review GST issues concerning life and health insurance. Members from multiple states will lead the GoM, with the final report expected by October 2024. The review aims to address taxation complexities in insurance services, providing a more rationalised GST structure.
This move signals the government’s intention to relook at the taxing of life and health insurance services to make it more equitable and reduce the burden on policyholders.
2. GST Exemption on Research and Development Services
To boost innovation and academic research, the GST Council has decided to exempt the supply of research and development services by government entities, universities, and research institutions. Funded by both private and government grants, these exemptions are expected to encourage further investment in R&D, which will help India’s innovation ecosystem thrive.
This decision reflects the government’s commitment to supporting the growth of R&D and academic institutions by reducing the financial burden associated with GST compliance on these essential services.
3. GST Rate Reductions on Critical Cancer Drugs
Cancer patients and healthcare providers received much-needed relief as the GST Council approved the reduction in GST rates for key cancer drugs. The drugs—Trastuzumab Deruxtecan, Osimertinib, and Durvalumab—will now attract a GST of 5%, down from the previous rate of 12%.
| Cancer Drug | Previous GST Rate | New GST Rate |
|---|---|---|
| Trastuzumab Deruxtecan | 12% | 5% |
| Osimertinib | 12% | 5% |
| Durvalumab | 12% | 5% |
This reduction will likely make cancer treatment more affordable, improving access to life-saving medication for patients in India.
4. Launch Of B2C E-Invoicing Pilot
One of the most notable decisions from the 54th GST Council meeting was the launch of a pilot for B2C e-invoicing. Following the successful implementation of e-invoicing for B2B transactions, the GST Council aims to extend this system to the retail sector. The B2C e-invoicing pilot will begin voluntarily in selected sectors and states, providing an opportunity for retail customers to verify the reporting of invoices in GST returns.
The potential benefits of B2C e-invoicing include:
- Improved business efficiency: Automation in invoicing processes will reduce human error and paperwork.
- Environmentally friendly: Digital invoices eliminate the need for physical receipts, promoting sustainable business practices.
- Cost savings: Businesses will benefit from reduced processing costs due to streamlined invoicing.
This pilot initiative, once fully implemented, is expected to not only enhance the accuracy of GST returns but also provide more transparency in retail transactions. Customers will be able to verify the authenticity of invoices, which could significantly curb tax evasion in the retail sector.
5. Changes in GST Rates for Goods
A. Reduction in GST Rates for Namkeens and Extruded Savoury Products
The GST Council has decided to bring extruded or expanded savoury food products, such as certain pre-packaged namkeens, in line with other similar products by reducing their GST rate from 18% to 12%. These items are classified under HS 1905 90 30. The move ensures uniformity in taxation across different snack items, which fall under similar categories.
B. Clarifications on Metal Scrap Taxation
In a move aimed at streamlining the tax process for metal scrap, the GST Council recommended introducing the Reverse Charge Mechanism (RCM) for the supply of metal scrap by unregistered suppliers to registered buyers. Under the new regime, registered buyers will be responsible for paying GST on such transactions. Additionally, a TDS of 2% will be applicable for metal scrap supplies made by registered suppliers in B2B transactions.
This step is aimed at preventing tax evasion in the scrap industry, which has traditionally been an area prone to unregistered dealings. By implementing these changes, the government seeks to bring more transparency to metal scrap transactions while ensuring that the tax burden is fairly distributed.
6. Clarification on GST for Life Insurance and Health Insurance
The GST Council has constituted a Group of Ministers (GoM) to examine the complexities surrounding GST on life and health insurance. The GoM, comprising members from several states, will deliver a comprehensive report by October 2024. This study is intended to rationalise the tax structure for insurance, addressing key concerns in the sector.
This development is crucial for the insurance industry, as it suggests potential changes that could make insurance policies more affordable by reducing the indirect tax burden on premiums. Given the rising demand for life and health insurance in India, this move could have far-reaching effects on policyholders and insurers alike.
7. GST Exemption for Affiliation Services to Government Schools
In a bid to reduce costs in the education sector, the GST Council has decided to exempt affiliation services provided by State/Central educational boards to Government Schools. This exemption, however, will be applied prospectively, starting from the date of notification. For the period between 1st July 2017 to 17th June 2021, GST liabilities will be regularised on an “as is where is” basis.
Affiliation services provided by universities to constituent colleges, however, will continue to attract 18% GST, with no exemptions for such services under the current rules. This decision aims to support government schools by reducing their financial burden, which can ultimately lead to better educational outcomes through increased investment in learning resources.
8. Amendments in CGST Rules for Exporters: Simplifying Refund Procedures
To alleviate difficulties faced by exporters, the Council has recommended amendments to Rule 89 and Rule 96 of the CGST Rules, 2017, specifically aimed at refund procedures where the benefit of concessional/exemption notifications under Rule 96(10) has been availed.
The key changes include:
- Clarifying that when imported inputs are subsequently subjected to IGST and compensation cess payments, IGST refunds on exports will not be considered a violation of the rules.
- The Council has also recommended the prospective omission of Rule 96(10), Rule 89(4A), and Rule 89(4B), streamlining the refund process for exporters and removing legal ambiguities.
These amendments are expected to simplify compliance and expedite refund claims for exporters, improving liquidity and encouraging greater participation in international trade.
9. GST Exemptions and Clarifications for Supply of Electricity Services
In the 54th GST Council meeting, a significant relief was extended to transmission and distribution utilities, with an exemption on services that are incidental to the supply of electricity. These services include application fees for electricity connections, rental charges for electricity meters, testing fees for meters/transformers, and charges for duplicate bills. These exemptions will apply when such services form part of a composite supply.
This move is expected to reduce the overall cost burden for electricity consumers, especially in rural and semi-urban areas, where transmission and distribution costs can be substantial. Regularising the past demands on an “as is where is” basis further ensures that there is clarity on past GST liabilities, allowing utilities to focus on operational improvements rather than tax disputes.
10. GST On Helicopter Services: A Sector-Specific Relief
The transport of passengers by helicopters on a seat-share basis has been brought under a reduced GST rate of 5%. This move primarily benefits the tourism sector and emergency services, where helicopters are often used for transportation in difficult-to-reach areas. Additionally, the Council has regularised the GST for past transactions under the “as is where is” basis.
The GST rate will continue to be 18% for chartered helicopter services, maintaining the distinction between regular seat-sharing services and exclusive chartered operations. This differentiation in rates reflects the varying nature of services provided in the aviation sector, especially in terms of affordability and accessibility for different types of consumers.
11. Special Procedures for Waiver of Penalties and Interest
One of the more taxpayer-friendly recommendations made during the meeting was the introduction of a special waiver of penalties and interest for demands arising under Section 73 of the CGST Act, 2017, for the fiscal years 2017-18, 2018-19, and 2019-20. The Council recommended the addition of Rule 164 to the CGST Rules, 2017, laying down specific procedures and forms for availing this waiver.
The introduction of this rule ensures that businesses and individuals who may have defaulted on tax payments in earlier years have a clear process to rectify their situation without incurring heavy penalties or interest. This measure is particularly important for small and medium enterprises (SMEs), who often face cash flow issues, and for whom large penalty sums could be debilitating.
Furthermore, the Council recommended the notification of Section 146 of the Finance (No. 2) Act, 2024, to bring into effect the provisions for penalty waivers from 1st November 2024. This move underscores the government’s intent to provide relief to businesses while maintaining compliance with the GST framework.
12. Reverse Charge Mechanism (RCM) for Renting of Commercial Properties
In another compliance-strengthening measure, the Council has brought the renting of commercial property by unregistered persons to registered persons under the Reverse Charge Mechanism (RCM). This step is seen as a move to curb revenue leakages in the commercial rental sector, where transactions often go unrecorded.
Under the RCM, the responsibility to pay GST will shift to the registered person receiving the services, which will ensure that the GST on such transactions is accounted for and collected efficiently. This also aligns with the broader goals of the GST regime in reducing tax evasion and bringing more transactions into the formal economy.
13. Flying Training Courses: Exemptions for DGCA-Approved Training
The Council clarified that flying training courses conducted by the Directorate General of Civil Aviation (DGCA)-approved Flying Training Organisations (FTOs) will be exempt from GST. This is a welcome move for the aviation sector, particularly for aspiring pilots and other aviation professionals, as it reduces the financial burden of pursuing flying training in India.
This exemption is expected to make flying training more accessible to a broader demographic, which can potentially help address the shortage of qualified pilots and aviation professionals in the country.
14. Introduction of New Ledgers for Taxpayers
As part of its continued effort to improve GST return filing and compliance, the GST Council introduced several enhancements to the existing GST return architecture. These enhancements include:
- Reverse Charge Mechanism (RCM) Ledger
- Input Tax Credit (ITC) Reclaim Ledger
- Invoice Management System (IMS)
The RCM Ledger will help taxpayers track their RCM liabilities more effectively, while the ITC Reclaim Ledger will assist in managing input tax credits. The Invoice Management System (IMS), on the other hand, allows taxpayers to accept, reject, or keep invoices pending for input tax credit purposes, reducing errors and improving reconciliation processes.
These changes are expected to reduce instances of input tax credit mismatches and help businesses avoid notices from the GST authorities, thus streamlining the entire tax compliance process.
15. Clarifications on Input Tax Credit for Demo Vehicles and Other Services
In the interest of providing clarity and preventing legal disputes, the GST Council recommended the issuance of circulars to address several ambiguities, including the availability of input tax credit on demo vehicles for vehicle dealers and the place of supply for advertising services provided to foreign entities.
By addressing these grey areas through clarifications, the Council aims to provide consistency in the interpretation of GST laws and minimise litigation, which has been a concern for businesses involved in cross-border and specialised services.
Summary Of The Key Highlights From The 54th GST Council Meeting
| Category | Key Recommendation/Decision |
|---|---|
| Life & Health Insurance | Formation of a Group of Ministers (GoM) to study GST on life and health insurance, report due by Oct 2024 |
| R&D Services | Exemption for research services by government entities, universities, and research institutions |
| Cancer Drugs | GST rate reduction from 12% to 5% for Trastuzumab Deruxtecan, Osimertinib, and Durvalumab |
| B2C E-Invoicing | Pilot project for B2C e-invoicing to be launched on a voluntary basis in selected sectors and states |
| Namkeens & Savoury Products | Reduction in GST rate from 18% to 12% on extruded/expanded savoury food products |
| Metal Scrap | Introduction of Reverse Charge Mechanism (RCM) for metal scrap transactions from unregistered suppliers |
| Helicopter Services | GST rate of 5% for passenger transport via helicopter (seat share basis); charter services to remain at 18% |
| Flying Training Courses | Exemption for DGCA-approved flying training courses from GST |
| Electricity Services | GST exemptions on various services incidental to electricity supply provided as part of composite supply |
| Commercial Property Rent | Introduction of RCM for commercial property rentals from unregistered to registered persons |
| GST Penalty Waivers | Special procedures for waiver of penalties and interest for FYs 2017-18, 2018-19, and 2019-20 |
| New Ledgers and Invoice Management | Introduction of new RCM, ITC Reclaim ledgers, and Invoice Management System for taxpayers |
| Car and Motorcycle Seats | GST rate increase from 18% to 28% on car seats to align with the 28% GST rate on motorcycle seats, effective prospectively |
| Roof Mounted Package Units (RMPU) | Clarification that RMPU air conditioning units for railways attract 28% GST under HSN 8415 |
Conclusion
The recommendations made during the 54th GST Council meeting reflect a balanced approach to streamlining tax compliance, providing relief to specific sectors, and clarifying ambiguous areas of the GST law. By focusing on rate rationalisation, reducing the tax burden on critical sectors such as healthcare and education, and enhancing compliance mechanisms, the Council has taken steps to make the GST regime more effective and taxpayer-friendly.
With further reforms expected from the GoM on life and health insurance and continued focus on simplifying processes for businesses, taxpayers can look forward to a more efficient and equitable GST system in the months to come.
