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GST Council Updates: Key GST Rate Changes and Compliance Reforms

The GST Council made several key recommendations related to GST tax rate changes, relief measures for individuals, trade facilitation, and streamlining compliance.

GST Rate Changes/Clarifications:

Goods:

1. Namkeens and Extruded/Expanded Savoury food Products: GST on extruded snacks (excluding un-fried/un-cooked) reduced from 18% to 12% (falling under HS 1905 90 30), aligning with products like namkeens and bhujia. Un-fried/un-cooked snacks remain at 5% (falling under HS 2106 90.).

On extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, GST Rate has been reduced to 12% (falling under HS 1905 90 30).

2. Cancer Drugs: GST on cancer drugs (Trastuzumab Deruxtecan, Osimertinib, Durvalumab) reduced from 12% to 5%.

3. Metal Scrap: Reverse Charge Mechanism (RCM) applies to supplies from unregistered to registered persons. TDS of 2% on B2B sales.

4. Railway Air Conditioning Units: Roof-mounted units for railways will attract 28% GST (HSN 8415).

5. Car and Motorcycle Seats: GST on car seats to increase from 18% to 28% (falling under 9401) , aligning with motorcycle seats.

Services:

1. Life and Health Insurance: A Group of Ministers (GoM) will examine GST issues around life and health insurance and report is expected by October 2024.

2. Passengers Transportation by Helicopters: The GST rate for Passenger transport        via helicopters attracts 5% on a seat-share basis. Further charter helicopter services will continue to attract an 18% GST rate.

3. Flying Training Courses: Flying Training Organizations (FTOs) Approved by Directorate General of Civil Aviation (DGCA) will be now exempt from GST.

4. Research and Development Services: R&D services provided by a Government Entity; or a research association, university, college or other institution will also be exempt from GST.

5. Preferential Location Charges (PLC): PLC for properties purchased before the completion certificate is issued will be part of the composite supply and these charges will follow the same tax rate as the main construction service.

6. Affiliation Services: Affiliation services from educational boards like CBSE are taxable. Future affiliation services from State/Central boards and similar bodies to government schools will be exempt from Oct-2024.Affiliation services provided by universities to their colleges are not exempt under notification No. 12/2017-CT(R) dated 28.06.2017. Therefore, an 18% GST rate applies to these services.

7. Import of Services by Foreign Airlines: The import of services by foreign airlines? branch offices, without any consideration, will now be exempt from GST and this will apply retroactively.

8. Renting Commercial Property: Renting by unregistered persons to registered persons falls under RCM.

9. GTA Ancillary Services: Services like loading/unloading, packing/unpacking, trans-shipment, temporary warehousing etc. when provided alongside goods transport, will now be considered part of the composite supply if a consignment note is issued. If these services are billed separately then they will not be treated as part of the composite supply.

Other Changes:

 

Trade Facilitation Measures:

1. Waiver of Penalties/Interest: Procedures for waiving penalties/interest for FYs 2017-2020, under section 128A, have been outlined (with effect from 01.11.2024).

2. New Procedures for ITC Violations: The GST Council suggested quickly notifying changes from the Finance (No. 2) Act, 2024, which retroactively update section 16 of the CGST Act, 2017 from July 1, 2017. They also recommended creating a special procedure under section 148 of the CGST Act for correcting orders related to incorrect input tax credit claims, if these credits are now allowed under the updated provisions. Additionally, the Council proposed issuing a circular to explain the new procedures and related issues.

3. Refund Clarifications: The GST Council recommended that if inputs were initially imported without paying integrated tax and compensation cess, but these taxes and interest were later paid and the Bill of Entry was reassessed by Customs, the IGST refunded on exports should not be seen as a violation of rule 96(10) of CGST Rules.

Additionally, to address refund difficulties caused by restrictions in rules 96(10), 89(4A), and 89(4B) of CGST Rules, the Council suggested removing these rules. This change will make the refund process simpler and faster for exporters using concessional or exempted inputs.

Issuing circulars to clear up confusion and resolve legal disputes on specific issues.

 

Other Measures:

1. B2C e-Invoicing Pilot: The GST Council recommended starting a pilot program for B2C e-Invoicing, building on the success of B2B e-Invoicing. This move aims to enhance efficiency, reduce costs, and be environmentally friendly. It will also allow retail customers to verify invoices in GST returns. The pilot will be voluntary and implemented in select sectors and states.

2. Invoice Management System (IMS): The Council noted updates to the GST return system, including new ledgers for Reverse Charge Mechanism (RCM) and Input Tax Credit Reclaim, as well as an Invoice Management System (IMS). Taxpayers can declare their opening balances for these ledgers by October 31, 2024. The IMS will let taxpayers manage invoices?accept, reject, or hold them?to reduce errors and improve reconciliation, potentially lowering notices for ITC mismatches.

These changes will be implemented via formal circulars, notifications, and amendments.