The 54th GST Council met under the chairpersonship of Union Minister for Finance & Corporate Affairs Nirmala Sitharaman in New Delhi.

Highlights of the 54rd GST Council Meeting:

The GST Council inter-alia made the following recommendations relating to changes in GST tax rates, provide relief to individuals, measures for facilitation of trade and measures for streamlining compliances in GST.

Changes/Clarifications in GST Tax Rates:

1) Goods

• The GST rate on extruded or expanded savoury products (excluding un-fried or uncooked snack pellets) under HS 1905 90 30 will be reduced from 18 per cent to 12 per cent, aligning with rates on namkeens, bhujia, and similar ready-to-eat products under HS 2106 90. The 5 per cent GST on un-fried or uncooked snack pellets will remain unchanged. The new 12 per cent rate applies prospectively.

• The GST rate on cancer drugs namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab to be reduced from 12 per cent to 5 per cent.

• Reverse Charge Mechanism (RCM) to be introduced on supply of metal scrap by unregistered person to registered person provided that the supplier shall take registration as and when it crosses threshold limit and the recipient who is liable to pay under RCM shall pay tax even if supplier is under threshold.

• A TDS of 2 per cent will be applicable on supply of metal scrap by registered person in B to B supply.

• To clarify that Roof Mounted Package Unit (RMPU) Air Conditioning Machines for Railways would be classified under HSN 8415 attracting a GST rate of 28 per cent.

• To clarify that car seats are classifiable under 9401 and attract a GST rate of 18 per cent.

• GST rate on car seats classifiable under 9401 to be increased from 18 per cent to 28 per cent. This uniform rate of 28 per cent will be applicable prospectively for car seats of motor cars in order to bring parity with seats of motorcycles which already attract a GST rate of 28 per cent.

2) Services

• GST Council recommended to constitute a Group of Ministers (GoM) to holistically look into the issues pertaining to GST on the life insurance and health insurance. 

• The GoM members are Bihar, UP, West Bengal, Karnataka, Kerala, Rajasthan, Andhra Pradesh, Meghalaya, Goa, Telangana, Tamil Nadu, Punjab, and Gujarat. The GoM is to submit the report by the end of October 2024.

• To notify GST @ 5 per cent on the transport of passengers by helicopters on seat share basis and to regularise the GST for past period on ‘as is where is’ basis. To also clarify that charter of helicopter will continue to attract 18 per cent GST.

• To clarify by way of a circular that the approved flying training courses conducted by DGCA approved Flying Training Organisations (FTOs) are exempt from the levy of GST.

• The GST Council recommended to exempt supply of research and development services by a government entity; or a research association, university, college or other institution, notified under clauses (ii) or (iii) of sub-section (1) of section 35 of the Income Tax Act, 1961 using government or private grants.

• To clarify that location charges or Preferential Location Charges (PLC) paid along with the consideration for the construction services of residential/commercial/industrial complex before issuance of completion certificate forms part of composite supply where supply of construction services is the main service and PLC is naturally bundled with it and are eligible for same tax treatment as the main supply that is, construction service.

• To clarify that affiliation services provided by educational boards like CBSE are taxable. However, to exempt affiliation services provided by state/central educational boards, educational councils and other similarly placed bodies to government schools prospectively. 

• To exempt import of services by an establishment of a foreign airlines company from a related person or any of its establishments outside India, when made without consideration. The council also recommended to regularise the past period on ‘as is where is’ basis.

• To bring renting of commercial property by unregistered person to a registered person under Reverse Charge Mechanism (RCM) to prevent revenue leakage.

• Ancillary services provided by a GTA during goods transportation, with a consignment note, will be considered part of a composite supply. If billed separately, they won’t be treated as part of the transportation service. 

What is the GST Council?

• The GST Council is a key constitutional body responsible for advising on the implementation of the Goods and Services Tax (GST) in India. 

• Its primary aim is to simplify the country’s tax structure, which previously involved multiple taxes levied by both the Centre and states, into a more uniform system.

Constitutional Provisions

• The GST Council was established following the 101st Amendment Act of 2016, which introduced GST into the Indian Constitution. This amendment inserted Article 279-A, empowering the President to constitute the GST Council through an order. 

• Consequently, the President issued an order in 2016, leading to the formation of the Goods and Services Tax Council.

Members

The GST Council is composed of:

• The Union Finance Minister, who serves as the Chairperson. 

• The Union Minister of State for Finance. 

• A minister nominated by each state government, usually the finance or taxation minister, or another designated minister. 

Functions

Article 279-A (4) grants the GST Council the authority to make recommendations on several key GST-related issues, including:

• Determining which goods and services should be subject to GST or exempted. 

• Formulating model GST laws. 

• Setting GST rates and deciding if adjustments are necessary for specific products.

• Considering special rates or provisions for natural calamities, disasters, and particular states. 

Working

The GST Council operates through meetings where decisions are made based on a majority of at least three-fourths of the weighted votes of members present and voting. 

The requirements for decision-making are:

• A quorum of 50 per cent of total members. 

• The central government’s vote carries one-third of the total weight. 

• State governments’ combined votes account for two-thirds of the total weight. 

Although the GST Council’s recommendations were previously binding, the Supreme Court’s ruling in the 2022 case of Union of India vs Mohit Minerals Pvt. Ltd. clarified that these recommendations are not binding on Parliament or State legislatures, which possess concurrent legislative power on GST.

(The author is a trainer for Civil Services aspirants.)