Key takeaways from the 54th GST Council meeting

On 9th Sept 2024, the 54th meeting of the Goods and Services Tax (GST), which was chaired by Finance Minister Nirmala Sitharaman, concluded at the Sushma Swaraj Bhawan in New Delhi. Like every other GST meeting, it was attended by key officials from the finance ministry, which included finance ministers from various states. Let us look at the key points or outcomes from the meeting.

Takeaway 1: Medical Insurance Premium

The Finance Minister (FM) announced that the council has formed a new Group of Ministers (GoM) to discuss GST rate deduction on medical health insurance setup. The new Group will be headed by the Deputy CM of Bihar and will have new members added for this limited purpose. The report from the Group is to come by end of October. The GST Council will meet again in November and take a call as per the report submitted by the newly formed Group.

Takeaway 2: Research funding and Cancer drugs

The GST Council made significant strides in supporting research and healthcare. Previously, research institutions faced financial strain due to GST on research funding. The council's decision to exempt research funding has provided much-needed relief, fostering innovation.

Additionally, the council's reduction in GST on specific cancer drugs from 12% to 5% is a compassionate move. It aligns with the government's healthcare priorities and could make essential treatments more accessible to patients.

Takeaway 3: Compensation cess and future considerations

The GST Council's decision to extend the compensation cess until 2026 was a pivotal move. Initially enacted to mitigate revenue losses for states following GST implementation, the cess imposed on luxury items and tobacco has generated substantial revenue.

As the original purpose of the cess nears its conclusion, discussions are underway to determine its future allocation. The estimated collection of Rs 8.6 lakh crores by 2026 raises questions about how these funds will be utilized. A dedicated ministerial committee will be formed to explore potential avenues, with significant implications for state finances and overall fiscal policies.

Takeaway 4: Relief for Foreign airlines

The GST Council has granted a significant exemption to foreign airlines, relieving them of GST payments on certain imported components and items. This decision addresses concerns raised by international carriers like British Airways and Lufthansa, who had faced demands from the Directorate General of Goods and Services Tax Intelligence (DGCI) for backdated GST payments.

This exemption could alleviate financial burdens for these airlines, making India a more attractive destination for international travel. It aligns with the government's broader goal of fostering a conducive business environment for foreign companies. However, this decision might spark discussions about tax fairness and potentially lead to increased scrutiny of domestic competitors.

Takeaway 5: Status of GST on Online gaming and casinos

The FM announced that following the announcement of GST on online gaming, there has been a 412% jump in revenue, as per a status report submitted to the fitment committee. Additionally, casino revenue grew by 30% during this period, reinforcing the decision to maintain the 28% rate GST on both skill-based and chance-based online games.

(The decision to increase the tax rate from 18% to 28% on skill-based games, announced in August 2023, was met with significant concern from the gaming industry).

Takeaway 6: For technology and e-commerce

A voluntary B2C e-invoicing pilot program was introduced in select sectors to enhance transparency and streamline processes. The potential benefits of B2C e-invoicing include:

• Improved business efficiency: Automation in invoicing processes will reduce human error and paperwork.
• Environmentally friendly: Digital invoices eliminate the need for physical receipts, promoting sustainable business practices.
• Cost savings: Businesses will benefit from reduced processing costs due to streamlined invoicing.

Also, the Tax Collected at Source (TCS) for e-commerce operators was reduced from 1% to 0.5%, easing the financial burden on suppliers.

Conclusion

Overall, the 54th GST Council meeting focused on providing relief to businesses, especially exporters and e-commerce operators. The decisions made are expected to improve the efficiency and ease of doing business in India.