Introduction
The 54th GST Council Meeting is scheduled for September 9, 2024, in New Delhi. Following a record GST revenue collection of ₹1.82 lakh crore in July, discussions are expected to focus on rationalising the GST structure from four to three tiers. The Council will also explore ways to streamline compliance and promote trade. Additionally, there may be a decision to end the compensation cess, which was initially introduced for five years to help states manage revenue losses during the GST transition.
Expectations from the 54th GST Council Meeting:
Rate Rationalisation
Following the 53rd meeting, the Finance Minister mentioned that the Group of Ministers (GoM) will update the Council on progress regarding rate rationalisation. Established in 2021, the GoM, led by Bihar’s Deputy CM Sumant Chaudhary, may propose changes to reduce tax slabs.
GST Compensation Levy
This levy, known as the GST Compensation Levy, was introduced to offset the financial losses experienced by states over a five-year period following the implementation of the Goods and Services Tax (GST) on July 1, 2017. Given that the GST is levied on consumption, states with significant manufacturing activities were expected to incur losses.
Although the initial duration of this levy was set to expire in June 2022, the federal government made a declaration in June of the previous year to prolong the GST Compensation Levy on luxury items and products with negative social impact until March 2026. The Council has the authority to merge it with the top GST tax rate of 28% or propose its complete abolition.
Inverted Duty Rate Structure
Manufacturers face higher input tax rates than finished products, leading to accumulated credits. A review of this structure for items like paper and solar glass is expected.
Changes in GST Rates:
GST on Cancer Drugs
The Council is expected to lower GST on key cancer drugs like Deruxtecan, Trastuzumab, and Osimertinib from 12% to 5% to make treatment more affordable.
GST on Online Gaming
A 28% GST was applied to online gaming, horse racing, and casinos in the 50th Council meeting. Although this decision sparked concerns about industry growth, it’s unlikely to be revisited until six months after its implementation in October 2023.
GST on Health Insurance Premiums
Health and life insurance premiums may see a reduction from the current 18% GST, offering relief to policyholders.
Reducing or eliminating the Goods and Services Tax on term insurance premiums may incentivize more individuals to safeguard their families’ futures without incurring extra costs. Additionally, this would broaden the base of insurance coverage, promoting industrial expansion.
Waiver of Taxes on Electricity Meter Services
Under GST, the supply of electricity and services provided by electricity transmission or distribution utilities (such as state electricity boards) for transmitting or distributing electricity is exempted by notifications. However, ancillary services like rental charges for metering equipment are taxable, as clarified by the CBIC in Circular No. 34/8/2018-GST. These ancillary services are essential for utilities to supply electricity. It is anticipated that the GST Council may clarify that such services, when treated as part of a composite supply where the principal supply is electricity, should also be exempt from GST.
Relief on Metal Scrap
The metal recycling industry is highly fragmented, with 30-40% of its players operating in the unorganized sector, making compliance with GST challenging and leading to potential tax evasion. Currently, a GST rate of 18% applies under the forward charge mechanism. The GST Council is urged to review and possibly revise this rate, as requested by the Material Recycling Association of India (MRAI).
Potential Inclusion of Petrol and Diesel
Section 9 of the CGST Act states that GST on products such as crude oil, diesel, motor spirit, natural gas, and aviation turbine fuel will apply from a date to be specified by the government. Although no date has been announced yet for implementing GST on petroleum products, there is speculation that the GST Council will discuss the applicable GST rates for petrol and diesel. This decision may resolve ongoing concerns about whether including these fuels under GST would lead to price increases, which currently vary by state.
GST on Transactions Between Foreign Branch Offices of Indian Companies
The GST provisions clarify the taxation of goods and services and the valuation of transactions between foreign branch offices of Indian companies and their head offices. The issue emerged when the department began issuing GST notices amounting to crores to taxpayers such as IT giant Infosys and 10 foreign airlines, including British Airways, Lufthansa, and Emirates, particularly for unpaid taxes on the import of services by Indian branches from their head offices. We can expect clarification on this matter in the upcoming council meeting.
The 53rd GST Council meeting, chaired by Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman, took place on June 22, 2024, in New Delhi. The meeting was attended by Union Minister of State for Finance Shri Pankaj Chaudhary; the Chief Ministers of Goa and Meghalaya; the Deputy Chief Ministers of Bihar, Haryana, Madhya Pradesh, and Odisha; as well as Finance Ministers and senior officials from the Ministry of Finance of States & UTs with legislatures.
