The 54th GST Council Meeting, chaired by Union Finance Minister Nirmala Sitharaman on 9th September 2024, brought forward significant reforms aimed at simplifying GST compliance, offering sector-specific relief, and addressing ambiguities in existing regulations. These decisions are expected to impact various sectors, such as insurance, healthcare, transport, and R&D, while also setting the stage for further reforms in tax compliance and administrative ease.
The Council’s decisions reflect a continued effort to streamline processes, reduce the tax burden in critical sectors, and promote transparency in GST transactions.
Key Recommendations from the 54th GST Council Meeting
1. Formation of Group of Ministers (GoM) for Life & Health Insurance
The GST Council formed a Group of Ministers (GoM) to study the complexities surrounding GST on life and health insurance. The GoM is expected to submit its report by October 2024, with the goal of rationalizing the tax structure and addressing the sector’s specific needs. This reform could potentially make insurance more affordable for policyholders.
Example:
- Current Scenario: Life and health insurance premiums attract 18% GST.
- Possible Change: If the GoM recommends a reduction, policyholders could see reduced premium costs.
2. GST Exemptions for Research & Development Services
In a move to foster innovation, the Council exempted government-funded research and development services from GST. This exemption applies to universities, research institutions, and government bodies, encouraging private and government investments in R&D.
Example:
- Before: A university receiving ₹10 lakh in private R&D funding had to pay 18% GST on those services.
- After: Post-exemption, the entire amount goes towards research, removing the financial strain of GST.
3. Reduction in GST Rates for Cancer Drugs
The Council approved a reduction in GST for life-saving cancer drugs—Trastuzumab Deruxtecan, Osimertinib, and Durvalumab—from 12% to 5%. This move aims to make cancer treatment more affordable for patients.
| Cancer Drug | Previous GST Rate | New GST Rate |
|---|---|---|
| Trastuzumab Deruxtecan | 12% | 5% |
| Osimertinib | 12% | 5% |
| Durvalumab | 12% | 5% |
Example:
- Impact: A cancer patient buying a drug costing ₹1,00,000 previously paid ₹12,000 in GST. With the new rate, GST is reduced to ₹5,000, significantly reducing treatment costs.
4. Launch of B2C E-Invoicing Pilot
After the successful implementation of B2B e-invoicing, the GST Council launched a pilot project for B2C e-invoicing. This system will allow retail customers to verify GST invoices in selected sectors, improving transaction transparency.
Benefits:
- Efficiency: Automated invoicing reduces paperwork.
- Sustainability: Digital invoicing reduces the need for physical receipts.
- Cost Savings: Retailers save on processing costs.
5. Reduction in GST for Namkeens and Extruded Savory Products
The GST rate for extruded savory products, such as pre-packaged namkeens, has been reduced from 18% to 12%. This change aligns these products with similar food items, ensuring consistency in taxation.
Example:
- Before: A pack of namkeen priced at ₹100 attracted ₹18 in GST.
- After: With the rate reduced to 12%, the GST falls to ₹12, benefiting consumers.
6. Reverse Charge Mechanism (RCM) for Metal Scrap
To combat tax evasion in the scrap industry, the Council introduced the Reverse Charge Mechanism (RCM) for metal scrap transactions. Registered buyers must now pay GST on scrap bought from unregistered suppliers. Additionally, 2% TDS will apply to metal scrap transactions between registered suppliers.
Example:
- Before: Unregistered suppliers often avoided paying GST on scrap transactions.
- After: The burden shifts to the registered buyer, ensuring that GST is collected efficiently.
7. GST Exemptions on Affiliation Services for Government Schools
The Council exempted affiliation services provided by State and Central educational boards to Government Schools from GST, effective prospectively from the date of notification. This exemption is expected to ease financial pressures on public schools.
8. Amendments in CGST Rules for Exporters
The Council recommended amendments to Rules 89 and 96 of the CGST Rules to simplify the refund process for exporters, especially those availing concessional import duties. The removal of legal ambiguities and prospective amendments will streamline export refunds.
9. GST Exemptions on Services Incidental to Electricity Supply
The Council granted GST exemptions on services incidental to electricity supply, such as application fees, meter rentals, and duplicate bill charges. This is a significant relief for utilities and consumers alike.
10. Sector-Specific GST Relief for Helicopter Services
The Council reduced the GST rate to 5% for passenger transport by helicopter on a seat-share basis. Charter services, however, will continue to attract 18% GST.
11. Waiver of Penalties and Interest for FYs 2017-18, 2018-19, and 2019-20
The Council introduced a waiver of penalties and interest for tax demands under Section 73 of the CGST Act for the fiscal years 2017-18 to 2019-20. This move is especially helpful for small and medium-sized businesses that struggled with compliance in those years.
FAQs
1. What is the Reverse Charge Mechanism (RCM)?
- Answer: Under RCM, the buyer (rather than the supplier) is responsible for paying GST on certain transactions, such as metal scrap or rental services from unregistered persons.
2. How does the B2C e-invoicing pilot improve transparency?
- Answer: Retail customers can verify the authenticity of their invoices, ensuring that businesses report accurate GST returns.
3. What relief does the GST Council provide for cancer patients?
- Answer: The Council reduced GST on life-saving cancer drugs from 12% to 5%, making these drugs more affordable.
4. Will life and health insurance premiums become cheaper?
- Answer: A Group of Ministers is studying the GST on insurance premiums. Any reductions will likely be announced in the coming months.
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