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Informist, Saturday, Dec. 21, 2024

 

--Sitharaman: Sitharaman: Council clarified GST on new EVs continues at 5% 
--Sitharaman: GST rate rationalisation GoM report not final, avoid speculation 
--Sitharaman: Deferred decision on GST on delivery fee by e-commerce platform 
--Sitharaman: Council mulled GST on delivery charges by e-commerce platforms 
--Sitharaman: Concept note to aid GST registration for small businesses 
--Sitharaman: Health, life insurance GoM yet to get IRDAI view on GST on premium 
--Sitharaman: GST rate rationalisation GoM given more time to finalise report 
--Sitharaman: More time to health, life insurance GoM to mull GST on premium 
--Sitharaman: Multiple states opposed bringing ATF under GST ambit 
--Sitharaman: GST Council could not reach consensus on GST on ATF 
--Sitharaman: GST Council okays extension to compensation cess panel 
--CONTEXT: Finance Minister Sitharaman's comments post 55th GST Council meet 
--Sitharaman: Council decided to exempt GST on gene therapy
--Govt: GoM on GST rate rationalisation has to mull rate tweaks, weigh slabs 
--Govt: Many details to be finalised for GoM to decide rate rationalisation 
--Govt: GST Council gave in-principle OK to concept note for small businesses

--Bengal Minister: Suggested new GST GoM for Andhra getting 1% GST cess 
--Andhra Pradesh Minister: Sought 1% GST cess on luxury items for Andhra 
--West Bengal Minister: Many states have opposed GST on ATF 
--Himachal Minister's comments post 55th GST Council meet 
--Himachal Pradesh Minister: Had detailed discussion on GST on ATF 
--Himachal Minister:Many states moot post GST compensation cess for 5 more yr

JAISALMER - The GST Council's 55th meeting held in this golden city in Rajasthan Saturday turned out to be rather lacklustre as members failed to build consensus on most of the items on the agenda. After several rounds of discussions, the Council broadly decided to "defer" all key decisions and a final call would be taken only after further work by the Group of Ministers tasked at looking at the issues. 

Informist had exclusively reported on Friday that after state and central revenue officers failed to build consensus on any big-ticket item, the Council would likely postpone all key decisions. The Officers typically meet ahead of the GST Council meeting to discuss and debate the agenda items. "The Council will likely defer all suggestions," an official, who was part of the officers' meeting, had told Informist on the condition of anonymity.

HEALTH, LIFE INSURANCE PREMIUM

While deliberations on the matter were held at Saturday's meeting, Finance Minister Sitharaman said the Group of Ministers are yet to hear back from all the stakeholders, including comments from the Insurance Regulatory and Development Authority. "It would not be fair to not hear all quarters before taking a final call," she said.

The Group of Ministers had recommended that the 18% GST levied on the premium on life insurance policies and the premium on health insurance products providing coverage of up to INR 500,000 may be exempted. Recommendations also included lowering the GST on the premium for health insurance coverage above INR 500,000 to 12% or 5%.

The panel on insurance premium GST is headed by Bihar Deputy Chief Minister Samrat Choudhury and includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, Kerala, Andhra Pradesh, Goa, Gujarat, Meghalaya, Punjab, Tamil Nadu, and Telangana. Experts had told Informist that if the GST rate on health and life insurance premium is reduced from 18% to 5% without the benefit of input tax credit, it could result in the building up of input tax credit at the insurers' end. This, coupled with the apprehension if insurance companies would pass on the price benefit to customers, had kept officers from taking a call on this matter at the earlier meetings.

RATE RATIONALISATION AND CESS

On GST rate rationalisation, the most looked forward item on the Council's agenda, Sitharaman said that all members were of the view that more details need to be worked out before rate changes can be announced. "Until the rates are decided, it is best to avoid speculation," the finance minister said.

She said that GST rate changes and rationalisation of tax slabs cannot be viewed in isolation and so the matter is much more complex than it seems. Additionally, the recommendations will have to be such that, on a net basis, it is revenue positive, she said. "The decision has to take into account simplification of GST tax slabs." 

Choudhury, who also heads the panel on rate rationalisation, had proposed in interim 

report rate tweaks on 148 items that could likely help the governments to raise an additional INR 220 billion per year. The proposed changes aimed to raise taxes on luxury and sin goods on the one hand and provide relief on essential items on the other.

The six-member Group of Ministers had been asked to recommend trimming the list of items exempt from GST, reassessing tax rates, and correcting inverted duty structures. As part of their recommendations, there was also a new proposed GST rate of 35% on sin goods like cigarettes, tobacco and related products, and aerated beverages from the current 28%. As per the panel's report, the four-tier tax slab of 5%, 12%, 18% and 28% will continue and a new rate of 35% may be introduced for a niche category of items that earlier attracted a cess in addition to the GST rate.

And this is where the compensation cess panel comes in. 

The GST cess, which was introduced to compensate states for revenue losses in the initial years of the GST regime, is due to end in March 2026. The cess on certain luxury and sin items such as tobacco items, motor vehicles, expensive motorcycles, caffeinated beverages and aerated drinks was introduced in 2017 to compensate states for the potential revenue losses in the first five years of the new GST regime.

Though the collection of GST compensation cess was to be discontinued in June 2022, it was extended till March 2026 to repay the loans taken by the Centre to compensate for the fall in revenue collections during the COVID-19 pandemic.

The Group of Ministers on compensation cess, headed by Minister of State for Finance Pankaj Chaudhary, which was initially scheduled to submit its report by Dec. 31, was given a six-month extension by the Council Saturday. It is now scheduled to submit the report by Jun. 30, the finance ministry said in a release. 

Besides, as always, multiple states sought the extension of compensation cess funds for another five years as revenues continue to be lower than pre-GST times, Himachal Pradesh Technical Education Minister Rajesh Dharman told reporters.

OTHER ISSUES

Another issue that was of importance in Saturday's Council meeting was the discussion to bring aviation turbine fuel under the ambit of GST. This as well remained unresolved. States were divided on the issue as value added tax is a major revenue source for them. West Bengal Finance Minister Chandrima Bhattacharjee told reporters that VAT is one avenues of revenue that the state has the sole hold on and compromising on that will not be wise. 

The Council Saturday also deferred taking a call on GST levied on food delivery charges by e-commerce platforms like Zomato and Swiggy. 

Coming to the shorter list--the list of the few decisions that were taken at the Council's meeting---included exempting GST on gene therapy, and reducing the GST rate on fortified rice kernel to 5%. The Council also took a call to raise GST on all used cars, including electric vehicles, to 18% from the current 12%. Currently, new EVs are charged a concessional GST rate of 5% and used EVs are charged 12%. It was clarified that new EVs will continue to attract 5% GST. The GST on used vehicles is applied only to the supplier's margin – the difference between the selling price and the purchase price or the depreciated value of the vehicle.

The Council also recommended 5% GST on ready-to-eat popcorn mixed with salt and spices if not pre-packed and 12% on pre-packed and labelled and 18% on caramel popcorn, to bring it in line with sugar-added snacks. 

Sitharaman also clarified that no GST is payable on the ‘penal charges' levied and collected by banks and non-bank finance companies from borrowers for non-compliance with loan terms.

The Council also gave an in-principle nod for a concept note that will facilitate easier registration for small businesses. This will later be vetted by the GST Council, following which there will have to be some legal changes, she said.  End

Reported by Priyasmita Dutta and Sagar Sen

Edited by Vandana Hingorani

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