55th GST Council Meeting – Highlights & Updates

Highlights from the 55th GST Council Meeting

Here are some of the key decisions taken by the GST Council.

1. The extension was provided to the Group of Ministers (GoM) formed on the compensation cess, rate rationalisation and health insurance to submit their report.
2. GST exemption was given to payment aggregators servicing less than Rs.2,000 payment. It needs to be noted that the said exemption is limited to payment aggregators only and does not cover payment gateways or fintech services which does not call for settlement for funds.
3. FM announces that no GST is payable on penal charges collected by banks and non-banking financial companies (NBFCs) on borrowers for non-compliance of loan terms.
4. Dried black pepper and raisins supplied by agriculturist will not attract GST charges
5. Council Meeting clarified that caramelised popcorn are treated at par with the products having added sugar. So, the GST applicable on it would not be the same as GST on salted popcorn which is a namkeen and subject to 5% GST.
6. The GST Council has pushed its deliberation on the GST rates applicable on the food and the delivery charges to deliver that food by a quick commerce or any food delivery app.
7. Currently, new Electric vehicles (EV) attract 5% and the GST Council addressed the issue of taxing used EV sold by one individual to another and confirmed that no GST would be applicable. However, if the businesses sells a used EV after refurbishments, the GST at 18% will be charged on margin value (Purchase price minus sale price) as would be for any other used car.

What is Cheaper and Costlier after the 55th GST Council Meeting?

Press Release of 55th GST Council Meeting

Download the complete press release issued by the Finance Ministry after the conclusion of the press conference on 21st December 2024.

Download Press Release

Expectations from the 55th GST Council Meeting

It will be interesting to see how the upcoming GST Council meeting will unfold after bringing up the most sought-after change in the Invoice Management System in the 54th GST Council Meeting.

This meeting is highly anticipated one as the agenda will cover recommendations from key Group of Ministers on:

1. Change in GST rates on tobacco products
2. GST on health and life insurance policy
3. Rate Rationalization

Also, we can expect the Council to propose recommendations on the following:

Exemption on Insurance Levy

The exemption or reduction of GST rates on health and life insurance policies has been a significant point of discussion for a long time. In the last council meeting, the Hon’ble Finance Minister asked the newly formed Group of Ministers (GoM) to submit the report by the end of October 2024. A relief on the rate of GST on health insurance is widely expected.

GoM, in its meeting, recommended the following:

1. Exempting GST on insurance premiums paid for term life insurance policies and senior citizens’ health insurance.
2. GST on premiums paid by individuals other than senior citizens for health insurance with coverage of up to Rs.5 lakhs is proposed to be exempted.
3. Bringing down GST from 18% to 5% on health insurance premiums for non-senior citizens.

The aim is to make insurance more affordable and push for more extensive adoption.

Reforms in Inverted Duty Structure

One of the primary expectations is reforming the inverted duty structure, where the tax rate on inputs is higher than the tax rate on finished products. This leads to an accumulation of unutilised input tax credits (ITC) and business liquidity issues. The Council is expected to rationalise GST rates to ensure that raw materials have lower GST charges than finished goods, streamlining the refund process and improving cash flows.

Change in GST Rates

GoM may propose a 35% special rate (including cess) for over 148 items like cigarettes, tobacco, and aerated beverages. This move would curb tobacco consumption and generate additional revenue for the government. It will stir the industry, as we already witnessed industry leaders such as online gaming and casinos asking to reduce the rate from 28% occasionally. The GoM is also expected to recommend changing GST rates on cosmetics, high-end garments, watches, shoes, handbags, bottled water, and bicycles.

Potential Inclusion of ATF, Petrol and Diesel

As of date, natural gas and other petroleum products are kept outside the purview of GST by virtue of Section 9 of the CGST Act. Petroleum companies are demanding that they be brought under the scope of GST so that they can claim the Input Tax Credit, which they aren’t able to do at the moment because they are not paying any GST. The upcoming 55th GST Council meeting may deliberate on the possibility of bringing aviation turbine fuel (ATF) in the scope of GST law.

Compensation on Cess

Implementing GST also led to the introduction of compensation Cess, an additional tax levied on specific goods and services. The purpose was to compensate states for any revenue loss from implementing  GST. Though initially it was decided to impose the cess for 5 years starting from July 1, 2017, in June 2023, the Government notified an extension of the compensation cess on luxury and demerit goods till March 2026. In the 54th GST Council meeting, it was decided to form a Group of Ministers (GoM) to study the figures and how to move forward with the cess. Though the GoM may seek a 3-month extension to finalize its recommendations on the cess roadmap, the upcoming GST Council meeting may address the applicability of the 22% cess on utility vehicles, especially those with engine capacities over 1,500 cc and specific dimensions.

GST Registration based on Taxpayer’s Risk Profile

The government is taking every necessary step to prevent fraudulent taxpayers from misusing the provisions of GST. Biometric-based Aadhaar authentication and document verification were required to ensure the applicant’s legitimacy. Applicants identified as low-risk based on data analysis were not required to visit a GST Suvidha Kendra (GSK) in person; rather, they were allowed to authenticate using OTP-based Aadhaar Authentication. We can expect the upcoming council meeting to discuss categories of registration and passing on the ITC benefits based on the taxpayer’s risk profile.