The 55th meeting of the GST Council was chaired by Union Minister for Finance & Corporate Affairs Nirmala Sitharaman in Jaisalmer on December 21.

Highlights of the GST Council meet:

• The Council decided to levy an 18 per cent GST on margin value on sale of all old and used vehicles, including EVs by businesses and agreed to keep jet fuel (ATF) out of the ‘one-nation-one-tax’ regime.

• It decided to clarify on taxability of popcorn, saying caramelised popcorn will continue to attract tax at the rate of 18 per cent. However, pre-packed and spiced popcorn will attract 12 per cent, while 5 per cent will be levied on unpacked and unlabelled ones.

• The Council postponed a decision on reducing taxes on health and life insurance. The much talked about Group of Ministers (GoM) recommendation of rate rejig in 148 items was not tabled before the Council.

• A GoM examining the issue had recommended exempting insurance premiums paid for term life insurance policies from GST and premium paid by senior citizens for health insurance cover. It had also suggested GST exemption on premium paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh.

• Some members of the Council felt that more deliberations were required before a final decision could be arrived at with regard to insurance taxation.

• The panel cut the tax rate on fortified rice kernels used for public distribution to 5 per cent from 18 per cent.

• No GST will be payable on penal charges levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.

• The panel deferred a decision on reducing the rate of tax on insurance premium, pending comments of the sector regulator.

Insertion of new provision for ‘Track and Trace Mechanism’

• In a significant move to plug leakage, the GST Council approved a proposal to implement ‘Track and Trace Mechanism’ for specified evasion-prone commodities.

• A unique mark will be affixed on such goods or packages to trace them throughout the supply chain.

• This is to insert an enabling provision in CGST Act, 2017 through Section 148A so as to empower the government to enforce the Track and Trace Mechanism for specified evasion-prone commodities.

• The system shall be based on a Unique Identification Marking which shall be affixed on the said goods or the packages thereof. 

• This will provide a legal framework for developing such a system and will help in implementation of mechanism for tracing specified commodities throughout the supply chain.

Goods and Services Tax (GST)

• The introduction of the Goods and Services Tax (GST) regime in the country was a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of central and state taxes into a single tax, the aim was to mitigate cascading or double taxation in a major way and pave the way for a common national market.

• Before implementation of the GST regime in the country, the issue was deliberated in detail by the empowered committee of state finance ministers, select committee of Rajya Sabha and Parliamentary Standing Committee on Finance.

• After detailed and prolonged deliberation, the Constitution (One Hundred and First Amendment) Act, after ratification by 50 per cent of the states, was assented to by the President on September 8, 2016. Thereafter, Central Goods and Services Tax (CGST) Act, Integrated Goods and Services Tax (IGST) Act, Union Territory Goods and Services Tax (UTGST) Act, and Goods and Services Tax (Compensation to States) Act were enacted in order to achieve a successful rollout of the GST regime in the country from July 1, 2017.

• With GST, India took a quantum leap towards the goal of establishing ‘one nation, one market’ by dismantling multiple taxes and unifying them into a single tax.

GST rate structure

• The GST rates on goods and services were fitted into four slabs largely based on the pre-GST indirect tax incidence both of Centre and states, including the embedded taxes. 

They are:

i) 5 per cent

ii) 12 per cent

iii) 18 per cent

iv) 28 per cent. 

• The GST rate structure has evolved with extensive deliberations in the GST Council and the four rate structure is a huge simplification over the multitude of taxes and cess with multiple state wise rates. GST rate structure has been further simplified after the roll out of GST. 

GST Council

• Goods and Services Tax Council is a constitutional body for making recommendations to the Union and state government on issues related to GST. The GST Council is chaired by the Union Finance Minister.

• As per Article 279A of the amended Constitution, the GST Council, which will be a joint forum of the Centre and the states, shall consist of the following members:

a) The Union finance minister (chairperson).

b) The Union minister of state in charge of revenue or finance.

c) The minister in charge of finance or taxation or any other minister nominated by each state government.

• As per Article 279A(4), the Council will make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain states, etc.

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