DisyTax

55th GST Council meeting highlights:-

• Fortified rice kernels’ GST rate reduced to 5 per cent
• Gene therapy receives GST exemption
• Revised definition proposed for pre-packaged and labelled items
• Penalty charges by banks exempt from GST
• Insurance premium tax reduction postponed pending IRDAI input
• 12 per cent GST applicable on ACC blocks with over 50 per cent fly ash
• GST exemption for agriculturist-supplied black pepper and raisins
• Long Range Surface to Air Missile (LR-SAM) system granted tax exemption
• Compensation cess lowered to 0.1% for merchant exporters, matching GST rate

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The 55th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman in Jaisalmer, Rajasthan, introduced several updates to the taxation framework while deferring discussions on GST restructuring for insurance products.

Finance Minister Nirmala Sitharaman, while addressing the media on Saturday, said the Bihar deputy chief minister Samrat Chaudhary felt that any decision on GST on health insurance would require GoM some more time.

• GST Council has given approval for a new registration process for small firms. On this issue, Sitharaman said, “Small companies have issues in registration with various kinds of verifications…we have prepared a concept note, and it has received approval of GST council…This will bring in a new registration process which will ensure the smooth registration of small companies.”
• The Council recommendedexemption of GST on contributions by general insurance companies from third-party motor vehicle premiums for Motor Vehicle Accident Fund.
• It also recommendedno GST on transaction of vouchers as they are neither supply of goods nor supply of services. The provisions related to vouchers is also being simplified.
• The Council recommendedreduction of payment of pre-deposit for filing an appeal before the Appellate Authority in respect of an order passed which involves only penalty amount.

• GST Council clarified that no GST is payable on ‘penal charges‘ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms

• Under goods category, the meeting decided to extend IGST exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, software meant assembly/manufacture of LRSAM system.

• The GST members also recommended to extend the concessional 5 % GST rate on food inputs of food preparations under “HSN 19 or 21” that are supplied for food preparations intended for free distribution to economically weaker sectionsunder a government program subject to the existing conditions.

• Under the Services category, the GST Council recommended to bring supply of the sponsorship services provided by the body corporates under Forward Charge Mechanism and exempt GST on the contributions made by general insurance companies from the third-party motor vehicle premiums collected by them to the Motor Vehicle Accident Fund, constituted under section 164B of the Motor Vehicles Act, 1988.

  This fund is constituted for providing compensation/ cashless treatment to the victims of road accidents including hit and run cases.

• It further clarified that pepper, whether fresh green or dried pepper and raisins when supplied by an agriculturist, is not liable to GST.

• It also recommended to reduce the rate of Compensation Cess to 0.1 per cent on supplies to merchant exporters at par with GST rate on such supplies and exempt from IGST imports of all equipment and consumable samples by Inspection Team of the International Atomic Energy Agency (IAEA) subject to specified conditions.

55th GST Council meeting extract:-

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Key takeaways from the meeting included tax rate adjustments across various sectors:-

Popcorn Taxation: Popcorn with salt and spices (if unpackaged) will attract 5% GST, pre-packaged popcorn will have a 12% GST rate, and caramel-coated popcorn will be taxed at 18%.

The GST Council later issued a clarification on popcorn taxes. It said that pre-packed and labelled ready-to-eat snacks will attract a 12 per cent tax, whereas an 18 per cent GST will be levied on caramelised popcorn. However, it said that the tax rate on popcorn has not changed, and the Council has agreed that the Central Board of Indirect Taxes and Customs (CBIC) will issue a circular on the current taxes on popcorn.

Fortified Rice Kernels: The GST rate was standardized at 5%, down from the previous 18%, regardless of end use.

Autoclaved Aerated Concrete (ACC) Blocks: ACC blocks containing more than 50% fly ash will now attract 12% GST, reduced from 18%.

Used Cars and EVs: The Council approved increasing GST on the sale of old and used cars, including smaller petrol/diesel vehicles and electric vehicles, to 18% from the earlier 12%

The GST Council postponed its decision on reducing tax rates for life and health insurance premiums during its 55th meeting held on Saturday. Chaired by Union Finance Minister Nirmala Sitharaman, the meeting saw council members agree that further technical discussions were needed. A Group of Ministers (GoM) has been tasked with additional deliberations on the matter.