The 54th GST Council took place on September 9, 2024, in New Delhi. The Union Finance and Corporate Affairs Minister presided over the meeting, which was visited by Union Minister of State for Finance Shri Pankaj Chaudhary, Chief Ministers of Goa and Meghalaya, Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana, as well as Finance Ministers of States and Union Territories (with legislature) and senior officers of the Ministry of Finance and States/UTs.
In this blog we’ll discover all about the 54th GST Council meeting highlights, updates and outcomes.
Highlights of the 54th GST Council Meeting
Here are some of the main decisions made by the GST Council:
- To stop fake invoicing, the Council has suggested that e-invoicing for B2C transactions be implemented gradually. To date, e-invoicing has only been applicable to B2B transactions involving a registered person with a turnover of more than Rs.5 crore.
- The status reports were duly provided by the Group of Ministers (GoM) constituted on the rate rationalization and real estate, respectively, and the talks will be held in additional meetings regarding the above two themes in upcoming council meetings.
- There have been no modifications to the GST applicable to online gaming, so, as decided at the 50th GST Council meeting in October 2023, 28% applies to casinos, games, and racetracks. It was previously stated that the situation would be assessed six months following the installation. According to the status report presented to the GST Council, revenue from online gaming climbed by 412% in 6 months to Rs. 6,909 crores from Rs.1,349 crores before the notice was issued, while revenue from casinos increased by 30%, from Rs.164 crores to Rs. 214 crores.
- It was planned to establish two new GoMs:
4.1. Bihar, UP, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat have joined the GoM on medical and health insurance, which is simply an extension of the existing GoM on rate rationalization, led by the deputy chief minister of Bihar. The newly created GoM must present the report by the end of October 2024. As a result, the GST Council is now maintaining the status quo by keeping the GST rate on life and health insurance at 18% and deferring action until the next meeting in November.
4.2 In June of last year, the federal government announced that the compensating cess on luxury and demerit items would be extended until March 2026. The Union Minister stated that they want to return the back-to-back loans, as well as the interest, by January 2026. The total cess collection (actual + projected) up to March 2025 was Rs.8,66,706 crores, while compensation paid until September 5th, 2024 was Rs.6,64,203, back-to-back loans repayable was Rs.2,69,208 crores, and interest was Rs.51,561 crores, so it was decided to form a GoM to study the figures and determine how to proceed with the cess.
- A Committee of Secretaries will be formed, chaired by the additional secretary of revenue, to explain and decide how to move forward with the IGST. In light of a negative IGST balance, issues of how to recover the excess IGST passed on to some states will be investigated. In addition, they must submit the report by the end of October 2024.
- Funding contributed for research to state-affiliated universities or research centres founded under state/central laws, or organizations that have received income tax exemptions, can receive both public and private research funding and are exempt from GST.
Expectations for the 54th GST Council Meeting
Following a monthly gross GST revenue collection of Rs. 1.82 lakh crore in July, it is time to anticipate a GST rate rationalization from a four-tier to a three-tier structure.
Also, the Council intends to implement steps to ease commerce and expedite GST compliance. We can also expect a decision to suspend the compensation cess for five years to assist states in coping with the initial revenue loss and stabilize the system as revenues grow.
Let’s look at what to expect from the upcoming GST Council meeting.
GST on small transactions using payment aggregators
The Fitment Committee has advocated bringing payment aggregators under GST by levying taxes on transactions of less than Rs. 2000.
Though the final decision will be made at the council meeting, the recommendation to include such low-value transactions is based on the enormous amount of such transactions that occur on a daily basis and are currently exempt from GST according to existing regulations.
As a result, we should expect the council to collect 18% GST in order to generate revenue.
Compensation Cess
As the name implies, the GST Compensation Cess was imposed to compensate states for revenue losses incurred as a result of the implementation of GST on July 1, 2017, for a five-year period. GST, as a consumption-based tax, would have resulted in revenue losses for states with a significant industrial sector.
Rate Rationalization
Following the 53rd Council meeting, the Finance Minister stated that the Group of Ministers (GoM) will present the status of its work and aspects covered by the panel at the next GST Council meeting.
The GoM was formed in September 2021 by Bihar’s Deputy Chief Minister, Sumant Chaudhary, to discuss tariff rationalization.
As a result, we should expect some substantial announcements regarding tax reduction schemes.
Inverted Duty Rate Structure
Because input tax rates are greater than those on finished products, producers in the domestic goods industry frequently complain about the accumulation of input tax credits and cascading costs.
The Commerce and Industry Ministry has submitted a list of products to the Finance Ministry, including paper, furniture, washing machines, solar glass, and air purifiers, to investigate inverted duty structure concerns.
However, despite the fact that the first imposed period concluded in June 2022, the federal government announced in June last year that the compensating cess on luxury and demerit items would be extended until March 2026. The Council can suggest outright cessation or explore combining with the highest GST tax bracket (28%).
Change in GST Rates
GST Rate for Online Gaming
In the 50th GST Council meeting, 28% GST was levied on internet games, horse racing, and casinos, putting an end to the confusion about “games of skill or chance”.
However, it sparked a debate inside the business by instilling concern among players about the sector’s growth and innovation.
There are fewer opportunities for the Council to debate this amendment at this meeting, which was scheduled for six months following its implementation in October 2023.
Premiums for Health and Life Insurance
Initially, when health and life insurance premiums were subject to an 18% GST slab rate, there was widespread outrage because premiums in the pre-GST era were subject to a 15% service tax.
However, after 7 years, policyholders might expect a rate reduction on their premiums, giving much-needed respite.
GST for Cancer Drugs
To make cancer treatment more affordable, the GST Council exempted Dinutuximab (Qarziba), a life-saving medicine that costs Rs. 36 lakh, during its 50th meeting.
The fitment committee is scheduled to discuss lowering the GST on the following critical cancer treatments from 12% to 5%: trastuzumab, deruxtecan, osimertinib, and durvalumab.
Exemption for Electric Meter Services
Notifications exempt the provision of power and services performed by an electricity transmission or distribution utility (for example, a state electricity board) through transmission or distribution of electricity from GST.
However, supplementary services such as leasing charges for metering equipment are taxable, as stated by CBIC in circular no. 34/8/2018-GST. Without these ancillary services, utilities will be unable to provide electricity.
One can anticipate the GST Council to clarify how it should be treated as a composite supply with electricity as the primary supply; it should be exempt from GST.
Relief for Metal Scrap
Metal recycling is one of the most fragmented sectors, with 30-40% of participants coming from unorganized areas. People struggle to understand the complexities of GST, which leads to noncompliance and tax cheating. Currently, an 18% GST is levied using the forward charge technique.
The GST Council may consider evaluating and modifying the rates, as proposed by the Material Recycling Association of India (MRAI).
Potential Inclusion of Petrol and Diesel
Section 9 of the CGST Act stipulates that GST will be levied on petrol crude, diesel, motor spirit, natural gas, and aviation turbine fuel beginning on a date to be determined by the government.
Though the government has not yet announced a timetable for levying GST on petroleum products, there is anticipation that the GST Council will consider the appropriate GST rate on petrol and diesel.
The decision may put an end to the ongoing debate over whether putting these fuels under GST will boost pricing, which currently varies by state.
GST on transactions between foreign branches of Indian companies and vice versa
GST rules were obvious in the taxation of goods and services, as well as the value of transactions between Indian enterprises’ international branches and vice versa.
The problem occurred when the government began sending GST notices costing crores to taxpayers such as IT behemoth Infosys and ten multinational airlines, including British Airways, Lufthansa, and Emirates, primarily for unpaid taxes on the import of services by Indian branches from their headquarters. As a result, we may expect clarity from future council meetings.
The 53rd GST Council meeting, chaired by Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman was held on June 22, 2024, in New Delhi. Shri Pankaj Chaudhary, Union Minister of State for Finance, attended the meeting, as did the Chief Ministers of Goa and Meghalaya, as well as the Deputy Chief Ministers of Bihar, Haryana, Madhya Pradesh, and Odisha, as well as Finance Ministers and senior officers from the Ministry of Finance of States and Union Territories (with legislature).
Wrapping It Up
The 54th GST Council Meeting made various resolutions concerning revenue generation, compliance, and tax rationalization in specific sectors. The Council also feels that there is a need to simplify the processes and make the matters of GST more transparent, may it be potential rationalization of rates, or focusing on preventing fake invoicing.
Decisions regarding compensation cess, medical insurance taxes, and online gambling taxes reassure the frame of GST imposed by the Council against both state and center requirements.
Taking into account the GoM reports and the attendant meetings, we expect further development in the country’s tax landscape. Businesses and taxpayers should keep their ears on the ground in anticipation of further developments that will bring clarity to these important issues.
FAQs
What was the essence of the 54th GST Council Meeting?
Most attention was directed at tackling the menace of subsidized or fictitious invoicing by introducing E-invoicing for B2C transactions, rationalizing the tax rates, and the center/s state issues like cess and IGST balance.
What Changes did e-invoicing incorporate in the current GST meeting?
The Council reasoned that E-invoicing for B2C transactions fighting bogus invoicing should be enforced in phases. Previously, it was intended only for B2B transactions for businesses with a turnover over Rs. 5 crores.
Is there a GST Maximum Limit on Online Gaming?
No, the council’s decision to maintain the tax rate adopted 28% GST on online gaming, casinos, and racetracks as social during the 50th council meeting for its review after six months is still in force.
What was the decision regarding Health and life insurance regarding GST?
The GST Council put off any movement on GST on health and life insurance cover premiums and left the remaining average GST @ 18% with clear indications that this matter will be taken up in subsequent council sessions after further consideration.
Is there any update on the compensating cess?
Yes, the Council affirmed that the compensating cess on luxurious and demerit goods shall extend to the month of March 2026. A GoM will examine the revenue figures and render appropriate recommendations in the future.