The GST Council meeting focused on streamlining GST rates, simplifying compliance for small businesses, expediting refund claims, and enhancing anti-evasion measures. Additionally, the Council has also approved upgrades to GST IT systems to boost efficiency and address technical issues. The meeting aimed to improve the overall effectiveness and fairness of the GST framework. The key decisions taken by the GST Council in the said meeting are as follows:
Changes relating to GST rate on goods and services
- The GST rate for extruded or expanded savoury or salted products (excluding unfried or un-cooked) classified under HSN 1905 9030 will be reduced from 18% to 12%, aligning with the rate for similar ready-to-eat preparations being classified under HSN 2106 90. The GST rate of 5% for un-fried or uncooked snack pellets remains unchanged. The reduced rate of 12% applies prospectively.
- The GST rate on cancer drugs, namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab to be reduced from 12% to 5%.
Our Comments
This reduction in GST rates comes on the heels of exemption from import duties levied on these medicines, proposed during the Union Budget 2024. Thus, going forward, local sales of such products after importation would be subject to the lowest GST slab rate – thereby granting overall relief to cancer patients.
- Registered persons buying metal scrap from unregistered suppliers must now pay GST under the Reverse Charge Mechanism (RCM). Suppliers must register once they exceed the threshold limit, but recipients must pay GST under RCM even if suppliers are below the threshold. Additionally, a TDS of 2% will be applicable on the supply of metal scrap by registered persons in case of B2B transactions.
Our Comments
The introduction of RCM upon the metal scrap dealer will make this sector an organized one and arrest leakage of GST for the exchequer. The levy of 2% TDS on B2B transactions, while coming as a small surprise, appears to have been recommended, keeping in mind the sale of metal scrap by dealers to people intending to buy metal scrap. This move would typically increase the compliance burden on the recipients as they would now be required to deduct TDS and adhere to compliances applicable to diductors of tax under GST. The culminating effect of both the changes can be read as "benefit to small dealers and slightly taxing upon the big players."
- It has been clarified that the Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways would be classified under HSN 8415, attracting a GST rate of 28%.
- It has also been clarified that car seats are classifiable under HSN 9401 and attract a GST rate of 18%. However, it has been decided to increase the rate to 28% prospectively to match the GST rate for motorcycle seats, which is already 28%.
- In light of the recent backlash from various stakeholders regarding the levy of GST on life insurance and health insurance, the GST Council had serious discussions regarding the reduction of GST on the said services. However, no conclusion has been reached. In order to resolve this issue and bring more clarity, the GST Council has recommended constituting a Group of Ministers (GoM) who will holistically look into this issue. The GoM is expected to submit its report by the end of October 2024.
Our Comments
The news has been out basis the Fitment Committee's analysis sparked by the plea coming from Hon'ble Union Minister Shri Nitin Gadkari, a broad consensus has been reached for lowering the GST rate on life and health insurance premiums. However, considering the GST revenue as high as INR 82 billion from life and health insurance premiums during the last fiscal year, it was ultimately decided to form a GoM for in-depth analysis.
- Services in relation to the transport of passengers by helicopters on a seat-sharing basis will now attract GST at 5%. Past period transactions are to be regularized on 'as is where is' basis. It has also been clarified that charter of helicopter services will continue to attract GST at 18%.
Our Comments
A welcome move from an industry standpoint that was plagued with notices demanding GST, interest and penalties. It will significantly boost the local tourism industry. The proposal brings much needed clarity and consistency regarding the GST rate applicable to services provided by helicopter operators to passengers at various pilgrimage sites in India. Previously, passenger services for Central Government-sponsored pilgrimages benefited from a lower 5% GST rate, while local pilgrimage sites like Amarnath Yatra were subject to higher rates due to state regulations. This amendment aims to level the playing field, ensuring that local pilgrimage sites can also benefit from the reduced GST rate.
- Research and development services provided by Government Entities or other institutions registered under Section 35 (1) (ii) or (iii) of the Income Tax Act, 1961 using government or private grants have been exempted from the levy of GST. Past period demands be regularized on 'as is where is' basis.
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