Changes in GST Tax Rate : Recommendations of the 53rd GST Council Meeting

The 53rd GST Council Meeting, chaired by Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman, took place in New Delhi on June 22, 2024. The Council discussed several important issues and made key recommendations aimed at refining the GST framework. These recommendations focus on changes in GST tax rates, measures to facilitate trade, and steps to streamline compliance.

Here are the key highlights regarding changes in GST tax rates on goods and services:

A. GST Rate Recommendations on Goods

The latest updates to GST and IGST rates aim to streamline tax structures across various sectors. Here are the key changes:

1. Uniform 5% IGST on Aircraft Parts:

Imports of parts, components, testing equipment, tools, and tool-kits for aircraft will now uniformly attract a 5% IGST, encouraging Maintenance, Repair, and Overhaul (MRO) activities.

2. 12% GST on Milk Cans:

All milk cans made of steel, iron, or aluminium, regardless of their use, will attract a 12% GST.

3. Reduced GST on Paper Packaging:

The GST rate on cartons, boxes, and cases made of corrugated and non-corrugated paper or paperboard has been reduced from 18% to 12%.

4. 12% GST on Solar Cookers:

All types of solar cookers, whether single or dual energy sources, will now attract a 12% GST.

5. Clarification on Poultry Keeping Machinery:

The GST rate of 12% on poultry-keeping machinery will explicitly include parts of these machines to address previous interpretational issues.

6. 12% GST on All Sprinklers:

All types of sprinklers, including fire water sprinklers, will attract a 12% GST, with past practices regularized based on genuine interpretational issues.

7. IGST Exemption for Defence Imports:

The IGST exemption on imports of specified items for defence forces has been extended for five years, until June 30, 2029.

8. IGST Exemption on Research Equipment:

Imports of research equipment and buoys under the RAMA programme will continue to enjoy IGST exemption, subject to specified conditions.

9. Compensation Cess Exemption for SEZ Imports:

Imports into SEZs by SEZ units or developers for authorized operations will be exempt from Compensation Cess, effective July 1, 2017.

These changes are designed to provide clarity and support to various industries, fostering growth and operational efficiency.

B. GST Rate Recommendations on Services

Recent recommendations for GST rates on services aim to provide exemptions and clarity in various sectors. Here are the key updates:

1. Exemptions for Indian Railways Services:

Services provided by Indian Railways to the general public, such as platform ticket sales, retiring rooms/waiting rooms, cloakroom services, and battery-operated car services, will be exempt from GST. Additionally, intra-railway transactions will also be exempt. This exemption will be regularized for the period from October 20, 2023, until the issuance of the exemption notification.

2. GST Exemption for Special Purpose Vehicles (SPVs):

Services provided by SPVs to Indian Railways, including the use of infrastructure built and owned by SPVs during the concession period and maintenance services supplied by Indian Railways to SPVs, will be exempt from GST. This exemption will be applied retroactively from July 1, 2017, on an 'as is where is' basis until the exemption notification is issued.

3. Accommodation Services Exemption:

A new entry will be created under notification No. 12/2017-CTR to exempt accommodation services valued up to ?20,000 per month per person, provided the accommodation is supplied for a minimum continuous period of 90 days. This exemption will also apply to past cases.

These recommendations are designed to reduce the tax burden on essential services and provide greater clarity and support for service providers.

C. Additional Changes Relating to Services and GST Clarifications

Recent updates to the GST framework address various service-related transactions, providing clarity and exemptions. Here are the key changes:

1. Co-insurance Premium:

Co-insurance premiums apportioned by the lead insurer to the co-insurer in co-insurance agreements will be declared as no supply under Schedule III of the CGST Act, 2017. Past cases will be regularized on an 'as is where is' basis.

2. Ceding and Re-insurance Commissions:

Transactions involving ceding commission/re-insurance commission between insurers and re-insurers will be declared as no supply under Schedule III of the CGST Act, 2017. Past cases will also be regularized on an 'as is where is' basis.

3. Reinsurance Services for Specified Insurance Schemes:

GST liability on reinsurance services for specified insurance schemes (Sr. Nos. 35 & 36 of notification No. 12/2017-CT) will be regularized for the period from July 1, 2017, to January 24, 2018.

4. Reinsurance Services for Government-Paid Premium Schemes:

GST liability on reinsurance services for insurance schemes where the total premium is paid by the government (Sr. No. 40 of notification No. 12/2017-CTR) will be regularized for the period from July 1, 2017, to July 26, 2018.

5. Clarification on Retrocession:

Retrocession, defined as ‘re-insurance of re-insurance,’ will be clarified as eligible for the exemption under Sl. No. 36A of notification No. 12/2017-CTR.

6. RERA Statutory Collections:

Statutory collections made by the Real Estate Regulatory Authority (RERA) will be clarified as exempt from GST under entry 4 of notification No. 12/2017-CTR.

7. Incentive Sharing for RuPay and BHIM-UPI:

Incentives shared by acquiring banks with other stakeholders under the promotion scheme for RuPay Debit Cards and low-value BHIM-UPI transactions will not be taxable. This sharing is defined under the incentive scheme and decided by NPCI in consultation with participating banks.

These recommendations are aimed at simplifying the GST framework, providing exemptions, and clarifying tax liabilities to enhance compliance and reduce administrative burdens.