The 50th meeting of the GST Council took place in New Delhi on Tuesday 11th July 2023, marking a significant milestone in the journey of the Goods and Services Tax (GST). Led by Finance Minister Nirmala Sitharaman, the council made several key recommendations to bring about changes in GST tax rates, facilitate trade, and streamline compliance processes. In this article, we will explore the major highlights of the meeting and the decisions taken by the council.
Changes in GST Tax Rates
The council & Group of Ministers (GOM), proposed several recommendations to revise the GST tax rates for goods. One notable change is the reduction of the tax rate on uncooked and unfried snack pellets from 18% to 5%. This move aims to promote the consumption of these snacks and make them more affordable for consumers.
Additionally, the council decided to exempt Integrated Goods and Services Tax (IGST) on imported medicines and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases listed under the National Policy for Rare Diseases. This exemption will help ensure that patients have access to these essential medical products without the burden of additional taxes.
GST council exempted cancer-related drugs, medicines for rare diseases, and food products for special medical purposes from GST tax.
Furthermore, the council introduced amendments to include certain items within the revised GST rates framework. For example, Linz-Donawitz (LD) slag, fish soluble paste, and imitation zari thread have been incorporated with reduced tax rates. LD slag, previously taxed at 18%, will now be taxed at 5%. Similarly, the tax rate on imitation zari thread and fish soluble paste has been reduced from 12% to 5%.
The council has approved the reduction of GST rates on four specific items. These changes include:
- Uncooked, unfried, and extruded snack palettes will now be subjected to a GST rate of 5%, down from the previous rate of 18%.
- Fish soluble paste will now be taxed at 5% under the GST regime, as opposed to the earlier rate of 18%.
- LD slag will be aligned with blast furnace slag, resulting in a reduced GST rate of 5% from the previous rate of 18%.
- Imitation zari thread has been revised from 12% to 5% under the new GST rate structure.
Additionally, the council has decided to lower the GST rate on food served in cinema halls from 18% to 5%. They clarified that the supply of food and beverages in cinema halls will be considered taxable as a restaurant service if (a) they are provided as part of or alongside a service, and (b) they are supplied independently from the cinema exhibition service. In cases where cinema tickets and the supply of food and beverages are bundled together, and this bundled supply qualifies as a composite supply, the entire supply will be subject to the GST rate applicable to the service of cinema exhibition, which is considered the principal supply.
The GST council has made several decisions regarding amendments and clarifications. Firstly, the council has agreed to amend entry 52B in the compensation cess notification to encompass all utility vehicles, regardless of their specific name, as long as they meet the specified parameters. These parameters include a length exceeding 4000 mm, an engine capacity exceeding 1500 cc, and a ground clearance of 170 mm or more. It has been further clarified that ‘ground clearance’ refers to the measurement in an unladen condition.
Additionally, the council has decided to include RBL Bank and ICBC Bank in the list of specified banks eligible for IGST (Integrated Goods and Services Tax) exemption on the import of gold, silver, or platinum. The list of banks and entities eligible for such exemption will be updated according to Annexure 4B (HBP) of the Foreign Trade Policy 2023.
Furthermore, the council has determined that for products like pan masala and tobacco, where there is no legal requirement to declare the retail sale price, the earlier ad valorem rate applicable as of March 31, 2023, will be notified to levy the compensation cess.
Facilitation of Trade and Compliance
The council also addressed measures to facilitate trade and simplify compliance processes. One of the recommendations is the extension of GST exemption on satellite launch services to private sector organizations such as ISRO, Antrix Corporation Limited, and New Space India Limited (NSIL). This move aims to encourage startups and promote innovation in the space sector.
To provide clarity on compliance for Goods Transport Agencies (GTAs), the council proposed amendments to simplify their tax obligations. Additionally, the taxability of services provided by directors of companies to their respective companies was clarified to ensure proper taxation.
The council has made several recommendations to facilitate the establishment and operation of the GST Appellate Tribunal. These recommendations pertain to the appointment and terms of the President and Members of the proposed tribunal, aiming to ensure its smooth constitution and functioning. Furthermore, the council has suggested that the provisions of the Finance Act, 2023, which concern the GST Appellate Tribunal, should be officially notified by the Center, taking effect from August 1, 2023.
In addition, the council has recommended the continuation of relaxations provided in the financial year 2021-22 for various sections of FORM GSTR-9 and FORM GSTR-9C into the financial year 2022-23. This extension is intended to alleviate the compliance burden on taxpayers. Moreover, for the convenience of smaller taxpayers, the exemption from filing an annual return (in the form of GSTR-9/9A) will also be extended for the financial year 2022-23, provided their aggregate annual turnover remains up to two crore rupees.
The council has announced its plans to issue a circular to offer clarification on the Tax Collected at Source (TCS) liability under Section 52 of the CGST Act, 2017, specifically in cases where multiple E-commerce Operators (ECOs) are involved in a single transaction of supplying goods or services, or both. This circular aims to address any uncertainties and provide clear guidelines on the matter.
Taxation of Online Gaming, Horse Racing and Casinos
One of the significant highlights of the meeting was the decision to levy a 28% GST rate on the full value of online gaming, casinos, and horse racing. This decision eliminates the distinction between games of skill and chance and aims to create a uniform tax rate for these activities. Previously, these services attracted an 18% GST rate.
While this decision may be seen as a setback for the Indian gaming industry, the council clarified that the intention was not to target any specific industry. Finance Minister Nirmala Sitharaman emphasized that the moral question of promoting online gaming and casinos beyond essential goods was considered during the decision-making process. The complexity of the issue had led to a pending decision for 2-3 years.
Clarity on ED Interference in GSTN
Concerns were raised by opposition-ruled states regarding the inclusion of the enforcement directorate (ED) in sharing information with the GST Network (GSTN). The finance ministry had introduced an amendment to the Prevention of Money Laundering Act (PMLA), allowing ED to share information with GSTN. However, the Revenue Secretary clarified that the recent notification empowers tax authorities with more information, and ED is not receiving or providing any information through this notification.
Numerous states governed by the opposition have raised apprehensions regarding the government’s choice to authorize the enforcement directorate (ED) to exchange information with the GST Network. Recently, the Ministry of Finance introduced an amendment to the provisions of the Prevention of Money Laundering Act (PMLA), 2002. As per the amendment, the ED will now be permitted to share information with GSTN, the organization responsible for managing the technological infrastructure of the Goods and Services Tax (GST) system.
Conclusion
The 50th GST Council meeting marked a significant milestone in the GST journey. The council’s recommendations to revise GST tax rates, facilitate trade, and streamline compliance processes are aimed at promoting economic growth and ensuring a simplified tax regime. While some decisions, such as the taxation of online gaming and casinos, may have an impact on specific industries, the council’s intention is to strike a balance between revenue generation and the promotion of essential goods and services. The GST Council’s efforts towards cooperative federalism and the establishment of a good and simple tax regime continue to shape India’s economic landscape.
To commemorate the 50th meeting of the GST council, Finance Minister Sitharaman unveiled a short film titled ‘GST Council – 50 steps towards a journey.’ Additionally, she introduced a Special Cover and customized myStamp to mark the occasion. Prior to this significant milestone, the Office of Nirmala Sitharaman tweeted, stating that the 50th meeting signifies the success of cooperative federalism and the establishment of an effective and simplified tax regime. Over the course of the previous 49 meetings, the council has made around 1500 decisions in line with the principles of cooperative federalism.
