The GST Council has recently introduced a series of significant recommendations designed to modify GST rates, streamline compliance, and facilitate trade. Here’s a detailed summary of the key points:

GST Rate Adjustments on goods and services

1. GST Rate Adjustments:

Goods:

·         Extruded and Expanded Savoury Products: The GST rate for these products, including certain snack pellets, is being reduced from 18% to 12%, aligning with the rate for similar ready-to-consume products. However, un-fried or un-cooked snack pellets remain at a 5% GST rate.

·         Cancer Drugs: The GST on specific cancer medications, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, will be reduced from 12% to 5%.

·         Metal Scrap: The Reverse Charge Mechanism (RCM) will be introduced for transactions where metal scrap is supplied by unregistered persons to registered persons. Additionally, a 2% Tax Deducted at Source (TDS) will be applied to business-to-business (B2B) metal scrap transactions. Registered suppliers will also face this TDS requirement.

·         Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways: These units will be classified under HSN 8415 and taxed at a 28% GST rate.

·         Car Seats: The GST on car seats will increase from 18% to 28%, aligning it with the rate for motorcycle seats. This new rate will apply prospectively.

Services:

·         Life and Health Insurance: A Group of Ministers (GoM) will be formed to review GST issues related to life and health insurance. The GoM, consisting of representatives from various states, is expected to report by the end of October 2024.

·         Helicopter Passenger Transport:The GST on helicopter passenger transport on a seat-share basis will be set at 5%. However, charter services will continue to attract an 18% GST rate.

·         Flying Training Courses: GST will not be levied on approved flying training courses provided by DGCA-approved Flying Training Organizations.

·         Research and Development Services: Exemptions will apply to R&D services provided by government entities or institutions using government or private grants. Past demands will be regularized on an ‘as is where is’ basis.

·         Renting of Commercial Property: Renting commercial property from unregistered to registered persons will be subject to RCM to prevent revenue leakage.

·         Affiliation Services: Affiliation services by educational boards like CBSE will be taxable. However, services by State/Central educational boards to government schools will be exempt. Past periods from July 1, 2017, to June 17, 2021, will be regularized.

·         Import of Services by Branch Offices: Imports of services by foreign airline branch offices from related entities outside India will be exempt if made without consideration. Past periods will be regularized.

Facilitation of Trade & Other Measures

2. Facilitation of Trade:

Waivers and Rectifications:

·         Interest and Penalty Waivers: New rules will outline the procedure for waiving interest or penalties for tax demands under section 73 of the CGST Act for fiscal years 2017-18, 2018-19, and 2019-20. The deadline for tax payment to avail of these benefits will be set as March 31, 2025. The rules will be notified from November 1, 2024.

·         Input Tax Credit Provisions: Amendments are suggested to better manage input tax credits and IGST refunds for exports. The proposed changes will remove restrictions and simplify refund procedures, especially for exporters who initially availed benefits under certain notifications.

·         Clarifications: Circulars will address specific ambiguities such as the place of supply for advertising services provided to foreign entities, input tax credit for demo vehicles, and data hosting services provided to international cloud computing providers.

3. Other Measures:

B2C E-Invoicing:

·         A pilot project for B2C e-invoicing will be rolled out to improve business efficiency, transparency, and environmental impact. This will be implemented on a voluntary basis in select sectors and states.

Invoice Management System (IMS):

·         Enhancements to the GST return system will include new ledgers for Reverse Charge Mechanism (RCM) and Input Tax Credit Reclaim, along with an IMS. This system will allow taxpayers to manage invoices more effectively, reducing errors in input tax credit claims and improving reconciliation processes.

These recommendations aim to simplify GST compliance, offer relief to various sectors, and streamline trade processes, ultimately enhancing overall efficiency and fairness in the GST system.