54th GST Council Meeting Highlights: Updates, Outcome, Press Release and Latest News

The 54th GST Council was held on 9th September, 2024 in New Delhi. It was chaired by the Union Finance and Corporate Affairs Minister and was attended by Union Minister of State for Finance Shri Pankaj Chaudhary, Chief Ministers of Goa and Meghalaya; Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana; besides Finance Ministers of States & UTs (with legislature) and senior officers of the Ministry of Finance & States/ UTs.

Highlights from the 54th GST Council Meeting

Here are some of the key decisions taken by the GST Council.

1. The Council has recommended implementing e-invoicing for B2C transactions in a phased manner. Until now, e-invoicing was applicable on B2B transactions for a registered person having turnover of over Rs.5 crore, but in order to prevent false invoicing. 
2.  By introducing the Invoice Management System, Reverse Charge Mechanism (RCM) ledger and an Input Tax Credit Reclaim ledger in the GST Portal, the Council informed the press about the enhancements to the current GST return filing mechanism. Further, it recommends taxpayers to declare their opening balance for these ledgers by 31st October, 2024.
3. The status reports were duly submitted by the Group of Ministers (GoM) formed on rate rationalisation and real estate, respectively, on the basis of which further discussions regarding the above two subjects will be held in upcoming council meetings.
4. No GST rate changes apply to online gaming; hence, as decided in the 50th GST Council meeting held in October 2023, 28% of the GST stands applicable to casinos, games, and race courses. It was held back then that the status would be reviewed after six months of the implementation. As per the status submitted to the GST Council, the revenue from Online Gaming had increased by 412% in 6 months to Rs. 6,909 crores from Rs.1,349 crores before the notification was issued, whereas the revenue in case of casinos was increased by 30%, i.e., from Rs.164 crores to Rs. 214 crores.
5. It was decided to create two new GoMs:
   1. newer members - Bihar, UP, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat - for limited purpose. The newly formed GoM is required to submit the report by the end of October 2024. Hence, the GST Council maintained the status quo by keeping the GST rate at 18% on life and health insurance and deferring it to the next meeting, which will happen in November.
   2. In June last year, the central government notified an extension of the compensation cess on luxury and demerit goods till March 2026. The Union Minister informed that by January 2026, they would repay the back-to-back loans taken and the interest thereon. The total cess collection (actual + projected) up to March 2025 was Rs.8,66,706 crores, whereas the compensation paid till 5th September 2024 was Rs.6,64,203, back-to-back loans repayable was Rs.2,69,208 crores and interest was Rs.51,561 crores and so it was agreed to form GoM for studying the figures and how to move forward with the cess.
6. A Committee of Secretaries under the chairmanship of the additional secretary revenue will be set up to explain and decide how to proceed with the IGST. Given a negative balance in IGST, how to retrieve the excess IGST passed on to some states will be studied. They must also submit the report by the end of October 2024.
7. Funds given for research to state-affiliated universities or research centres formed under state/central laws or those institutions which have obtained income tax exemptions u/s 35 of the Income Tax Act can receive research funds from public or private sources and are exempted from GST.
8. The GST Council recommended notifying Sections 118 and 150 of the Finance Act, 2024. It introduces CGST Sections 16 (5) and (6) retrospectively from 1st July 2017 to address input tax credit (ITC) eligibility criteria and rectification of wrong availment of ITC. A special procedure will be introduced under CGST Section 148 allowing taxpayers who received demand orders under Sections 73, 74, 107, or 108 for wrong ITC claimed against the provisions of CGST Section 16(4) who haven’t appealed against the orders. They can rectify their position if the ITC is now allowed under the newly added CGST Section 16(5) or (6).
9. New conditions and procedure shall be outlined in the CGST Rules through the new Rule 164 for waiving interest, penalties, or both for tax demands under Section 73 of the CGST Act for the financial years 2017-18, 2018-19, and 2019-20. Registered taxpayers can avail of this waiver if they make the necessary tax payments by 31st March 2025, as per Section 128A. Clarifications on the waiver process will be provided through a circular, and the related provisions will be effective from 1st November 2024.
   
10. The following two transactions would attract tax on a reverse charge basis:
    1. Sale of metal scrap by unregistered to registered persons
    2. Renting of commercial property by unregistered to registered persons

Note: 2% TDS would apply to the Business to Business (B2B) supplies of metal scrap by registered persons.

What is Cheaper and Costlier after the 54th GST Council Meeting?

Clarifications by the GST Council:

• The Roof-Mounted Package Unit (RMPU) Air Conditioning Machines for Railways would be classified under HSN 8415, attracting a 28% GST rate.
• Flying training courses approved by DGCA conducted by Flying Training Organisations (FTOs) are exempt from GST. 
• Preferential Location Charges (PLC) paid along with construction services form part of the composite supply. It will follow the same tax treatment as construction services.
• Affiliation services provided by boards like CBSE are taxable. However, services provided by state/central boards to government schools will be exempted prospectively. Past liabilities (from 1st July 2017 to 17th June 2021) will be regularised. Also, affiliation services by universities to their constituent colleges are taxable at 18%.
• Ancillary services provided by Goods Transport Agencies (GTA) during transportation (e.g., loading, unloading, trans-shipment) form part of the composite supply when issued with a consignment note. If invoiced separately, these services will not be considered part of the transport of goods.
• GST liability for the past period before 1st October 2021 will be regularised for film distributors acting on a principal basis. 
• Incidental services related to electricity supply, such as meter fees and testing charges, provided as part of a composite supply by utilities, will be exempt from GST. Past liabilities for these services will also be regularised on an "as is where is" basis.
• The GST Council recommended that exporters who initially imported inputs without paying IGST and compensation cess, but later paid them with interest and reassessed the Bill of Entry, can still claim IGST refunds on exports without violating rule 96(10). Additionally, rule 96(10), rule 89(4A), and rule 89(4B) will be omitted prospectively to simplify and expedite the refund process for such exports.
• The GST Council recommended issuing circulars to clarify the Place of Supply for advertising services to foreign entities and data hosting services provided to cloud computing providers abroad. It also clarified the availability of Input Tax Credit on demo vehicles used by vehicle dealers, aiming to resolve ambiguities and prevent legal disputes.

Press Release of 54th GST Council Meeting

Download the complete press release issued by the Finance Ministry after the conclusion of the press conference on 09th September 2024.

Download Press Release

As announced by the Finance Minister, 55th GST Council meeting will mostly be held in November.

Expectations from the 54th GST Council Meeting

After achieving a monthly gross GST revenue collection of Rs. 1.82 lakh crore in July, it's time to look forward to a GST rate rationalisation from a 4-tier to a 3-tier structure. 

Further, the Council is aiming to take measures to facilitate trade and streamline GST compliances. We can also expect a decision to cease the compensation cess introduced for five years to help states tide over the initial revenue loss and stabilise the system as revenues grow.

Let's delve into the expectations from the upcoming GST Council Meeting.

Rate Rationalisation

After the 53rd Council meeting, the Finance Minister said that the Group of Ministers (GoM) will present the status of its work and aspects covered by the panel in the next GST Council Meeting. The GoM was set up in September 2021 under Bihar's Deputy Chief Minister, Sumant Chaudhary, to discuss rate rationalisation. Hence, we can expect some significant announcements regarding reducing tax slabs.

GST on Small Transactions Made via Payment Aggregators 

The Fitment Committee has proposed to bring payment aggregators under the purview of GST by levying taxes on transactions less than Rs. 2000. Though the final decision would be taken in the council meeting, the recommendation to include such low-value transactions is based on the significant volume of such transactions that gets incurred on a day to day basis which due to current provisions get escaped from GST. Hence, we can expect the council to levy 18% GST to increase the revenue.

Inverted Duty Rate Structure

Due to higher tax rates applicable on inputs than finished products, manufacturers from the domestic goods industry often complain about the accumulation of input tax credits and cascading costs. The Commerce and Industry Ministry has shared a list of products with the Finance Ministry, including paper, furniture, washing machines, solar glass, and air purifiers, to examine the inverted duty structure issues.

Compensation Cess

As the name suggests, GST Compensation Cess was levied to compensate the states for the loss of revenue arising due to the implementation of GST on July 1, 2017, for five years. GST, being a consumption-based tax, would have resulted in the loss of revenue for manufacturing-heavy states. 

However, though the period for which it was initially levied expired in June 2022, the central government, in June last year, notified an extension of the compensation cess on luxury and demerit goods till March 2026. The Council can propose complete discontinuation or consider integrating with the highest GST tax bracket of 28%.

Change in GST Rates

GST Rate on Online Gaming

28% GST was levied on online games, horse racing and casinos in the 50th GST Council meeting, ending the confusion over "games of skill or chance". However, it paved the way for a debate within the industry as it created fear among the industry players about the sector's growth and innovation. There are fewer chances for the Council to address this amendment during this meeting, which was set for review six months after its enforcement in October 2023.

Premiums Paid for Health and Life Insurance

Initially, when health and life insurance premiums were brought under the purview of an 18% GST slab rate, it was widely protested because premiums in the pre-GST era were subject to a 15% service tax. After 7 years, however, one can witness a rate reduction on these premiums, providing much-needed relief to policyholders.

GST on Cancer Drugs

To make cancer treatment affordable, the GST Council, earlier in the 50th Council meeting, exempted one of the life-saving drugs, Dinutuximab (Qarziba), which costs Rs. 36 lakh. Now, it's expected that the fitment committee will most likely consider reducing the GST on the following essential cancer drugs: Trastuzumab, Deruxtecan, Osimertinib, and Durvalumab from 12% to 5%.

Exemption on Electricity Meter Services

The supply of electricity and services provided by an electricity transmission or distribution utility (e.g. state electricity board) by way of transmission or distribution of electricity is exempted under GST by notifications. But ancillary services such as rental charges against metering equipment are taxable as clarified by CBIC in its circular no. 34/8/2018-GST. Without these ancillary services, utilities won’t be able to supply electricity. One can expect the GST Council’s clarification on treating it as a composite supply where the principal supply is electricity; it should be exempt from GST. 

Relief on Metal Scrap

The metal recycling industry has 30-40% players from unorganised segments, making it one of the most fragmented industries. People find it difficult to understand the nitty-gritty of GST, leading to non-compliance and tax evasion. Currently, a GST of 18% under the forward charge mechanism is applicable. GST Council can consider reviewing and revising the rates as requested by the Material Recycling Association of India (MRAI).

Potential Inclusion of Petrol and Diesel

Section 9 of the CGST Act states that GST on petrol crude, diesel, motor spirit, natural gas and aviation turbine fuel shall apply from a date the government will notify. Though the government has not notified any date for levying GST on petroleum products yet, there are speculations that the GST Council will discuss the applicable GST rate on Petrol and Diesel. The decision could put the rest on the ongoing notion of whether including these fuels under GST could increase the prices or not, which at the moment varies from state to state.

GST on Transactions Between Foreign Branch Offices of Indian Companies and vice-versa

The GST provisions were evident in the taxation of goods and services and the valuation of transactions between foreign branch offices of Indian companies and vice versa. The issue arose when the department started issuing GST notices worth crores to taxpayers like IT giant Infosys and 10 foreign airlines, including British Airways, Lufthansa, and Emirates, particularly on unpaid taxes on the import of services by Indian branches from their head offices. Hence, we can anticipate clarification from the upcoming council meeting.

The 53rd GST Council meeting was held under the Chairpersonship of the Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman was held on June 22 2024, in New Delhi. The meeting was also attended by Union Minister of State for Finance Shri Pankaj Chaudhary; Chief Ministers of Goa and Meghalaya; Deputy Chief Ministers of Bihar, Haryana, Madhya Pradesh, and Odisha, besides Finance Ministers and senior officers of the Ministry of Finance of States & UTs (with legislature).