GST Council Meeting: Finance Minister Nirmala Sitharaman-led goods and services tax (GST) Council Meeting on Saturday, December 21, decided to levy an 18 per cent GST on margin value on sale of used electric vehicles (EVs) by businesses and clarified on the taxability of popcorn, saying caramel popcorn will continue to attract tax at the rate of 18 per cent.
The GST Council in its 55th meeting conducted in Jaisalmer, Rajasthan, on Saturday, deferred the much-awaited decisions on reducing tax rate over life and health insurance premiums as also on levying tax over food delivery by app-based platforms such as Swiggy, Zepto, and Zomato.
The panel, headed by Nirmala Sitharaman and comprising representatives of all states and union territories, also clarified that pre-packed and spiced popcorn will attract a 12 per cent tax rate, while five per cent will be levied on unpacked and unlabeled ones. The GST Council cut the tax rate on fortified rice kernels used for public distribution to five per cent from 18 per cent.
Here's the complete list of all items that will become cheaper and dearer with the 55th GST Council Meeting decisions, with their new tax rates:
On the subject of EVs, Sitharaman stated that the GST Council intends to promote EVs, which will be taxed at five per cent. Sale and purchase of used vehicles by individuals will continue to be exempt from GST. The finance minister said the council decided to raise the rate of tax to 18 per cent from 12 per cent on all used EV sales, just as in case of non-electric vehicles.
It will be applicable only on the value that represents margin - the difference between the purchase price and selling price (depreciated value if depreciation is claimed) - by businesses. This means, if an EV is purchased by a company, modified, and resold, it will be taxed at 18 per cent. The GST will apply to the margin value between the purchase price and selling price of the used EV.
Caramelised popcorn will continue to attract tax at the rate of 18 per cent. 'Ready-to-eat popcorn', which is mixed with salt and spices, and has the essential character of namkeens currently attracts a five per cent GST if it is not pre-packaged and labelled. Additionally, pre-packaged and labelled ready-to-eat snacks/popcorns will attract a 12 per cent tax.
GST Council has cut the tax rate on fortified rice kernels used for public distribution to five per cent from 18 per cent. The Finance Minister clarified that ACC blocks containing 50 per cent fly ash will attract a 12 per cent GST rate. She also stated that black pepper and raisins supplied directly by farmers will be exempt from GST. This means, black pepper and raisins when supplied by an agriculturalist is not liable to GST payment.
The Finance Minister announced that no GST will be levied on penal charges imposed by banks and non-banking financial companies (NBFCs) on borrowers for non-compliance with loan terms.
Sitharaman clarified that payment aggregators handling payments of less than ₹2,000 will be eligible for an exemption. However, she noted that this decision does not extend to payment gateways or fintech companies.
The GST council provided the reduction of the compensation cess rate to 0.1 per cent on supplies to merchant exporters, aligning it with the GST rate on such supplies. Sitharaman also announced that the Group of Ministers (GoM) working on the compensation cess issue would be given an extension.
The GST Council decided to impose 18 per cent tax rate when used or old vehicles, are sold by registered sellers. According to the tax panel, such vehicles sold directly between two individuals will not attract any tax.
The GST Council has totally exempted gene therapy from the ambit of GST. The exemption of IGST on surface to air missiles was also extended.
Sitharaman said that states did not agree on bringing aviation turbine fuel under the ambit of GST. "States did not feel comfortable. They didn't want the ATF because they saw it as part of the crude petroleum diesel basket, and therefore they said that it alone cannot be taken out, and therefore that continues to remain where it is today," she said while briefing the media.
The GST Council agreed to keep jet fuel (ATF) out of the 'one-nation-one-tax' regime. Regarding the inclusion of ATF under GST, Sitharaman confirmed that the decision was deferred after states raised concerns. She said, "There will be no change in the taxation of ATF, and no panel will be appointed for this issue."
Without naming any state, she said the states wanted to continue to keep ATF, used in aircrafts, out of the GST. When the GST subsumed more than a dozen central and state levies into GST in July 2017, five products - crude oil, petrol, diesel, ATF and natural gas - were kept out of its purview. The central government levies excise duty on them and states levy VAT.
On small companies facing registration problems, Sitharaman said a concept note has received in-principle approvals. This may require amendments to be made to the GST Acts to make it easier for small companies to register.
-FSI: The GST Council could not reach a decision on the taxation related to Floor Space Index (FSI), and this matter remains under consideration.
-Calamity cess: The GST Council decided to set up a Group of Ministers (GoM) to mull over allowing states to levy cess under GST to overcome financial distress after natural calamities. The GST law provides for levy of special taxes for a specified period to raise additional resources during any natural calamity or disaster.
Finance ministers of Uttar Pradesh, Telangana and West Bengal would be part of the GoM. The GST Council decided to form the GoM after Andhra Pradesh sought Council's approval to levy one per cent calamity cess to overcome financial distress post flood in the state.
-Delivery charges on quick commerce: The GST Council also discussed the imposition of GST on quick commerce services, e-commerce, and food delivery platforms, but no decision was reached. Levying tax on delivery charges by the platforms was delayed.
"This has been deferred," said FM Sitharaman, adding the Fitment Committee (comprising officials from the Centre and states GST department) will again review it and the issue being debated is if the tax should be equivalent to five per cent GST rate levied on food or more.
-Health insurance premium: The GST Council deferred a decision on reducing the rate of tax on insurance premium, pending comments of the sector regulator. The GoM examining the issue had recommended exempting insurance premiums paid for term life insurance policies from GST and premium paid by senior citizens for health insurance cover.
It had also suggested GST exemption on premium paid by individuals, other than senior citizens, for health insurance with coverage of up to ₹5 lakh. On the matter of health insurance, the GST Council provided relaxation to the GoM to decide on the reduction of GST rates on insurance premiums. Sitharaman noted that the GoM felt more time was needed for broader deliberations to determine an appropriate tax rate on insurance premiums.
Bihar Deputy Chief Minister Samrat Chaudhary, who heads the panel on GoM on insurance, said one more meeting is required to take a call on taxation of group, individual, senior citizen's policies. "Some (Council) members said more discussions required. We (GoM) will meet in January again," said Chaudhary.
The issue of GST on life and health insurance was placed before the GST Council in its 54th Meeting held on September 9, 2024, in New Delhi. The GoM was tasked to look into GST rates related to medical insurance and come up with a report so that the GST Council could take up the matter. Both life insurance and medical insurance premiums attract a GST rate of 18 per cent.
-Rate rationalisation: Alongside, the GoM on rate rationalisation, which is looking at tweaking rates on 148 items, will be given more time to arrive at a decision. "No report (on rate rationalisation) has been finalised," she said.
The GST rate rationalisation GoM report, which has suggested rate tweaks in 148 items, was not tabled before the Council and would be taken up in next Council meeting. The GoM on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, has been given an extended deadline to submit its report. The earlier deadline was December 31, 2024.
FM Sitharaman further stated that the GoM will review the decision on implementing a cess for disaster management funding and will also take a closer look at health and insurance-related issues. However, she added that no timeline had been determined for these reviews.
Currently, GST is a four-tier tax structure with slabs at 5, 12, 18 and 28 per cent. Luxury and demerit goods are taxed at highest bracket of 28 per cent, while packed food and essential items are at the lowest five per cent slab. GST rates and exemptions are prescribed on the suggestions of the GST Council, a Constitutional body comprising representatives from states/UTs and the Centre.
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