GST Update – 54th GST Council Meeting Recommendations

The 54^th Goods and Services Tax (GST) Council meeting was held on 09 September 2024.  The Council has made several recommendations, primarily relating to changes in GST rates, relief to be provided to individuals, measures for facilitation of trade and measures for streamlining compliances in GST.  We have captured below the key recommendations.

GST Amnesty scheme

1. Section 146 of the Finance Act, 2024, which introduced Section 128A in the CGST Act, allowing for waiver of interest or penalties on tax demands under Section 73 of the CGST Act for FY 2017-18, 2018-19 and 2019-20, is recommended to be made effective from 1 November 2024.

2. Rule 164 to be inserted in Central Good and Services Tax Rules, 2017, specifying the procedure and conditions for availment of benefit of waiver of interest or penalty, with respect to Amnesty Scheme.

3. Timeline of 31 March 2025 recommended for payment of dues to avail benefit of the Amnesty Scheme.

Clarifications

1. Circular to be issued to clarify the “Place of Supply” of advertising services availed by foreign entities from Indian advertising companies.

2. Circular to be issued to clarify availability of Input Tax Credit on demo vehicles by dealers of vehicle manufacturers.

3. Circular to be issued to clarify the “Place of Supply” of data hosting services provided by service providers located in India to cloud computing service providers located outside India.

4. For film distributors or sub-distributors acquiring and distributing films operating on a principal-to-principal basis, GST liability for the period prior to 1 October 2021 to be regularised on an ‘as is where is’ basis.

5. Incidental/ ancillary services provided by GTA such as loading, unloading, packaging, temporary warehousing, transhipment etc., during transportation of goods, will be treated as composite supply. However, if such services are invoiced separately, then these services will be not be treated as composite supply.

6. Affiliation services provided by educational boards like CBSE will be taxable, however those provided by state/ central boards to government schools will be exempt prospectively. The practices between 1 July 2017 and 17 June 2021 will be regularised on ‘as is where is’ basis.

7. Preferential Location charge will form part of composite supply, where supply of construction services will be the main supply, will be taxable in the same manner as construction service.

Changes to GST rate

1. Extruded or expanded products falling under HS 1905 90 30 – reduced from 18% to 12%. This is in line with the GST rate on ready-to-eat products.

2. Cancer drugs such as Trastuzumab Deruxtecan, Osimertinib and Durvalumab – reduced from 12% to 5%.

3. Transport of passengers by helicopter on seat share basis – to attract a GST levy of 5%.

4. Car seats – increased from 18% to 28%, in line with the GST rate on motorcycle seats.

5. Affiliation services provided by universities to constituent colleges – to attract a GST levy of 18%.

6. Roof Mounted Package Unit Air Conditioning machine for railways (to be classified under HSN 8415) – to attract a GST levy of 28%.

Exemptions proposed

1. Supply of research and development services by Government entity, research association, university, college or other institution under section 35 of the Income Tax Act.

2. Import of services without consideration, by an establishment of a foreign airlines from a related person or any of its establishment outside India.

3. Supply of services ancillary to the supply of transmission and distribution of electricity such as application fees, meter testing fees, charges for duplicate bills etc., when provided as a composite supply.

4. Approved flying training courses conducted by Directorate General of Civil Aviation.

Other measures

1. Constitution of a Group of Ministers to comprehensively consider the levy of GST on the life insurance and health insurance. A report is expected to be submitted to the GST Council by end of October 2024.

2. Roll out of a pilot B2C e-invoicing mechanism.

3. Under Section 148 of the CGST Act, a special procedure for rectification of orders may be notified, for cases where demand for wrongful availment of Input Tax Credit (ITC) has been confirmed, due to violation of Section 16(4) of the CGST Act. This is pursuant to the Budget proposal allowing availment of ITC for FY 2017-18 to FY 2020-21 up to 30 November 2021. With this Budget proposal, it is likely that several orders will need rectification which has disallowed such ITC. 

4. Reverse charge mechanism to be introduced on supply of metal scrap by unregistered person to registered person. TDS of 2% will be applicable on B2B supply of metal scrap by registered person.

5. Renting of commercial property by unregistered person to a registered person to be brought under reverse charge mechanism.