55th GST Council Meeting: Key Reforms & What’s at Stake

55th GST Council Meeting: What’s at Stake for Businesses and Consumers?

The 55th GST Council meeting on December 21, 2024, is expected to address pivotal reforms like GST rate rationalisation, inverted duty structure, and taxation on insurance premiums. These decisions could significantly impact India's taxation system, aiming to enhance efficiency, reduce cascading tax effects, and improve cash flow for businesses.

?? GST Rate Rationalisation: A Step Towards Simplification

One of the key topics on the agenda is GST rate rationalisation. The objective is to reduce the cascading effect of taxes by merging tax slabs and addressing anomalies like the inverted duty structure. The inverted duty structure, where tax on raw materials is higher than on finished goods, leads to blocked working capital due to accumulated Input Tax Credit (ITC). This reform could streamline refunds and improve liquidity for businesses.

Potential Changes:

1. Lower GST on Insurance Premiums: The GoM (Group of Ministers) is likely to recommend reducing the 18% GST on life and health insurance premiums, particularly for senior citizens and policies up to ?5 lakh. This move aims to make insurance more affordable, addressing India’s low insurance penetration rate of just 1%, compared to the global average of 4%.
2. Higher GST on Luxury Goods: There have been speculations about a 35% GST rate on luxury and demerit goods like tobacco, cigarettes, and aerated drinks. This aligns taxation with social policy goals by keeping essential goods affordable while taxing harmful products higher. However, the CBIC clarified on December 3, 2024, that these speculations are premature.

?? Addressing Inverted Duty Structure

Correcting the inverted duty structure has been a priority since the 45th GST Council meeting. The GoM on Rate Rationalisation was tasked with:

• Simplifying rate structures.
• Reducing classification disputes.
• Enhancing GST revenues.

These reforms aim to ensure that tax rates on raw materials are lower than on final products, reducing the need for frequent refunds and improving cash flow for industries.

?? Tax on Food Delivery Charges: Clarity Expected

The Directorate General of GST Intelligence (DGGI) has issued notices to food delivery platforms like Swiggy and Zomato regarding GST on delivery charges. The fitment committee's recommendations on this matter are likely to be discussed in the 55th meeting. Clarity on:

• Taxability of delivery charges.
• GST registration threshold for delivery partners.

This will resolve ongoing disputes and provide a clearer compliance framework for the food delivery industry.

?? Inclusion of Petroleum Products Under GST

Despite repeated demands, products like petroleum crude, diesel, petrol, and aviation fuel (ATF) remain outside GST. Discussions in the 55th meeting may focus on bringing ATF and natural gas under GST. Benefits include:

1. ITC for Airline and Gas Companies: Allowing Input Tax Credit on ATF and natural gas could lower operational costs and enhance price efficiency.
2. ‘One Nation, One Tax’ Goal: Including these products under GST brings India closer to a unified tax regime.

?? Why This Meeting Matters

The decisions from the 55th GST Council meeting could:

• Simplify GST compliance.
• Improve business cash flows.
• Make insurance more accessible.
• Enhance revenue through rationalised rates.

These reforms will shape the future of GST in India, aiming for a streamlined and effective tax environment that benefits both businesses and consumers.