Navigating the Latest GST Changes: Key Highlights and FAQs from the 54th GST Council Meeting

The 54th GST Council meeting has introduced several important updates to the GST framework. These changes impact various sectors, including healthcare, real estate, and transportation. This blog provides a summary of the key outcomes and answers to frequently asked questions (FAQs) to help you understand the implications of these changes.

Rate Adjustments: What’s New?

1. Reduced GST Rates

   – Namkeens and Savory Snacks: The GST rate has been reduced from 18% to 12% for certain savory food products.

   – Cancer Drugs: The GST rate has been reduced from 12% to 5% for specific cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab.

2. Increased GST Rates

   – Car and Motorcycle Seats: The GST rate on car seats has been increased from 18% to 28%, aligning it with the rate applied to motorcycle seats.

New Procedural Changes

1. Section 128A of CGST Act, 2017: New procedures have been introduced for waiving interest or penalties under Section 73 for the financial years 2017-18, 2018-19, and 2019-20.

2. Rule 164 in CGST Rules, 2017: Details the procedures and conditions for waiving interest or penalties under Section 128A.

Important Clarifications

1. Roof Mounted Air Conditioning Units: These units are classified under HSN 8415 with a GST rate of 28%.

2. Life and Health Insurance: A Group of Ministers (GoM) will review GST implications for life and health insurance.

3. Flying Training Courses: GST exemption has been clarified for DGCA-approved flying training courses.

4. Preferential Location Charges (PLC): PLCs are now part of the composite supply of construction services.

5. Affiliation Services: Clarification on the taxability of affiliation services provided by educational boards and universities.

6. Ancillary Services by GTAs: Services provided by Goods Transport Agencies (GTAs) are considered part of composite supply.7. Import of Services by Branch Offices: GST exemption has been clarified for services imported by foreign airline companies without consideration.

Other Key Decisions

1. Reverse Charge Mechanism (RCM): RCM has been introduced for the supply of metal scrap and renting of commercial property by unregistered persons.

2. B2C E-Invoicing: A pilot rollout has been recommended for selected sectors and states.

3. Invoice Management System (IMS): New ledgers, including an RCM ledger and an Input Tax Credit Reclaim ledger, have been introduced.

4. Film Distribution Services: GST liability for past periods has been regularized where the distributor acts on a principal basis.

5. Electricity Supply Services: Exemptions have been provided for certain ancillary services related to electricity supply.

  Looking Ahead: New Recommendations

– GoM on Compensation Cess: The formation of a Group of Ministers (GoM) has been recommended to study the future of compensation cess.

📋 FAQs

Q1: What are the new GST rate reductions announced?

– A1: GST rates for certain namkeens and savory snacks have been reduced from 18% to 12%. Additionally, the GST rate on specific cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, has been reduced from 12% to 5%.

Q2: Why has the GST rate on car seats increased?

– A2: The GST rate on car seats has been increased from 18% to 28% to align it with the rate applied to motorcycle seats. This adjustment aims to ensure uniformity in tax treatment for similar products.

Q3: What is Section 128A of the CGST Act, 2017?

– A3: Section 128A introduces procedures for waiving interest or penalties under Section 73 for the financial years 2017-18, 2018-19, and 2019-20. It provides a framework for relief from past compliance issues.

Q4: How does Rule 164 affect businesses?

– A4: Rule 164 outlines the procedures and conditions for waiving interest or penalties under Section 128A. This rule is intended to simplify the process for businesses seeking relief from past compliance challenges.

Q5: What is the GST rate for roof-mounted air conditioning units used in railways?

– A5: Roof-mounted air conditioning units for railway applications are classified under HSN 8415 and attract a GST rate of 28%.

Q6: How will the changes impact life and health insurance sectors?

– A6: The GST Council has proposed that a Group of Ministers (GoM) review the GST implications for life and health insurance. This could lead to future adjustments in tax rates or exemptions for these sectors.

Q7: What is the significance of the GST exemption for flying training courses?

– A7: The GST exemption for DGCA-approved flying training courses has been clarified, ensuring that these educational programs remain tax-free, which can help in keeping the cost of aviation training lower.

Q8: What does the clarification on Preferential Location Charges (PLC) mean for real estate?

– A8: PLCs are considered part of the composite supply of construction services. This means that these charges will be taxed along with the construction services, impacting how real estate transactions are taxed.

Q9: How does the Reverse Charge Mechanism (RCM) impact metal scrap and commercial property rentals?

– A9: The introduction of RCM means that taxes will be collected directly from the recipient of metal scrap and from renters of commercial property who are unregistered. This change aims to increase tax compliance in these areas.

Q10: What are the upcoming changes regarding the Compensation Cess?

– A10: A Group of Ministers (GoM) is recommended to study the future of the compensation cess. This could lead to a reassessment of how the cess is applied and its impact on revenue distribution.

These updates from the 54th GST Council meeting are designed to enhance clarity, improve compliance, and address sector-specific issues. Businesses and stakeholders should stay informed and adjust their operations accordingly to align with these new regulations.