Summary: The 54th GST Council meeting, held on 9th September 2024 in New Delhi, addressed several key issues related to GST. Two Groups of Ministers were formed to discuss GST on life and health insurance and the extension of compensation cess beyond March 2026. The Council approved regularization of GST on an ‘as is where is’ basis for certain services like affiliation fees and film distribution, and it made adjustments to rates and exemptions on specific goods and services. Notable changes include implementing reverse charge mechanisms for commercial renting and metal scrap supply, which may affect small businesses. The Council also highlighted the importance of simplifying compliance to encourage taxpayers to comply rather than evade. Looking ahead, the 55th meeting in November 2024 will address unfinished business, including rate rationalization and insurance exemptions. The Council continues to focus on easing business compliance, though concerns remain that regularizing non-compliance could inadvertently encourage further issues. Additionally, the CBIC plans to introduce an Invoice Management System from 1st October 2024 to streamline the input tax credit process by allowing taxpayers to manage invoices more efficiently.
Introduction: Recently, Finance Minster had stated that there is no friction on GST with the states and that simplifying and easing compliance on taxpayer is a priority rather than raising revenue. Further, efforts must be made to avoid evasion and addressing the concern so much so that taxpayer starts thinking that it is better and easier to comply than to evade.
54th GST Council meeting took place at New Delhi on 9th September, 2024. It formed two Group of Ministers for life insurance & health insurance and for continuity of compensation cess beyond March, 2026 and discussed the status on rate rationalization and taxation of online gaming. The Council approved regularization of taxation on ‘as is where is’ basis on certain issues such as affiliation fees, film distribution, airlines etc. It also tweaked the rates and exemptions in respect of few goods and services, besides bringing reverse charge on commercial renting and metal scrap supply. The next (55th) GST Council meeting may take place now in November, 2024 to take call on the unfinished agenda including rationalization of GST rates, exemption to life insurance and health insurance, compensation cess etc.
Of late, it has been that the all empowered GST Council has been simplifying the things by way of regularizing the existing or past non-compliances on ‘as is where is’ basis. While this practice enables the ease of doing business besides putting a full stop to the ongoing disputes, it may also encourage such other non-compliances to continue in the hope of getting regularized in future. It is desirable that such issues should not arise in first place for which suitable clarification must be issued at the initial stage itself and the tax authorities should also be advised accordingly. However, regularization on ‘as is basis’ ensures reduction in litigation, better compliance without any extra cost as no refunds are supposed to be made on taxes already paid.
Also, GST Council should focus on core reforms and macro issues leading to tax efficiency, better tax administration, widening the scope of supply, rates rationalization, cess etc. It should not be dealing with interpretational issues and approving clarifications which should be left to tax administration and policy makers. Tweaking the tax rates and exemptions or changing the clarifications should be left to tax legal and judicial bodies. It should focus on reforms and improvement in architecture of GST framework.
Bringing commercial renting into reverse charge basis may add to tax revenue but it will become cumbersome for taxpayers as even small businesses who use immovable property on rental basis, may have to register for reverse charge under GST.
CBIC shall introduce Invoice Management System w.e.f. 1st October, 2024 to enhance input tax credit eco system by way of new Invoice Management System (IMS). This will allow recipient taxpayers to either accept or reject invoice or to keep it pending. The accepted invoices will become part of their GSTR 2B and eligible credit.
GST Council met for its 54th Meeting on 9th September, 2024 and deliberated / decided / recommended on the following issues:
> Group of Ministers (GoM) for:
- GST on life & health insurance
- GST rate rationalization
- Future of Compensation Cess
> Clarifications to be issued on:
- Flying training courses conducted by DGCI to be exempt.
- Affiliation services provided by University are taxable
- ITC on demo vehicles
- Place of supply of data hosting services
- Place of supply of advertising services to foreign entities.
> New Rule 164 in CGST Rules, 2017 for procedure under section 128A for waiver of interest / penalty to be inserted w.e.f. 01.11.2024.
> Recommended mechanism for rectification of orders for wrong availment of ITC under section 16 (5, 6) of CGST Act, 2017.
> Exemption to supply of research and development services (R & D) by Government entity, research association, university etc.
> Renting of commercial property by unregistered person to registered person under reverse charge mechanism.
> Ancillary services by GTA to be considered as composite supply and taxed as GTA.
> Exemption to ancillary services in relation to electricity supply to be treated as composite supply and exempt.
> Regularization of GST liability of film distributors
> Affiliation services to be taxable @ 18% and are not exempt. Prospective exemption for Government boards / Government schools.
> Preferred Location Charges (PLC) to be taxed at same rate of underlying construction service.
> Roll out of pilot project for B2C e-invoicing
> GST on metal scrap to be under reverse charge mechanism
> Car seats to be taxed at 28%
> Transport of passengers by shared helicopter @ 5%
> Reduction in GST rate to 5% on cancer drugs.
> Reduction in GST rate to 12% on namkeens and extruded / expanded savory food items.
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