55th GST Council Meeting Highlights: Tax Updates, Deferrals, and Industry Reactions

The 55th GST Council Meeting, chaired by Finance Minister Nirmala Sitharaman in Jaisalmer, Rajasthan, introduced notable changes to India’s taxation system while deferring decisions on certain critical issues. The meeting covered topics ranging from popcorn taxes to insurance GST restructuring. Here’s a detailed overview of the key highlights, tax rate changes, and implications for various sectors.

Key Tax Rate Updates from the GST Council Meeting

1. Popcorn Taxation

Popcorn pricing and taxation were a significant point of discussion. The GST rates for different types of popcorn were clarified:

• Unpackaged popcorn with salt and spices: 5% GST
• Pre-packaged popcorn: 12% GST
• Caramel-coated popcorn: 18% GST

The GST Council clarified that the rates have not changed but agreed that the Central Board of Indirect Taxes and Customs (CBIC) would issue an official circular to address any confusion.

2. Fortified Rice Kernels

• Previous GST Rate: 18%
• Revised GST Rate: 5%

This adjustment aims to promote the consumption of fortified rice to combat malnutrition.

3. Autoclaved Aerated Concrete (ACC) Blocks

• Previous GST Rate: 18%
• Revised GST Rate: 12% for ACC blocks containing over 50% fly ash.

4. Used Cars and Electric Vehicles (EVs)

The GST on the sale of old and used vehicles, including petrol/diesel and electric cars, has been increased:

• Previous GST Rate: 12%
• Revised GST Rate: 18%

Deferred Decisions

1. Health and Life Insurance Premiums

The Council deferred discussions on reducing GST for life and health insurance premiums. A Group of Ministers (GoM) led by Bihar Deputy Chief Minister Samrat Chaudhary will continue deliberations and present recommendations in the next meeting.

Proposed Changes:

• Exemption for term life insurance premiums.
• GST exemption for health insurance premiums up to ₹5 lakh coverage.
• Retaining 18% GST for policies exceeding ₹5 lakh coverage.

2. GST on Aviation Turbine Fuel (ATF)

States expressed discomfort with bringing ATF under the GST regime, and the proposal remains on hold.

3. Food Delivery GST

The Council also postponed its decision on imposing GST on food delivery services through e-commerce platforms, despite a lengthy discussion.

Additional Updates

Gene Therapy Exemption

Gene therapy has been completely exempted from GST, reflecting its critical importance in medical advancements.

Black Pepper and Raisins

• Black pepper (fresh or dried) and raisins supplied by agriculturists will not attract GST.

Penal Charges by Banks and NBFCs

Penal charges for non-compliance with loan terms will no longer attract GST.

Industry and Expert Reactions

Complexity Concerns

Former Chief Economic Advisor Arvind Subramaniam criticized the updates, stating:

“This is a national tragedy, violating the spirit of the Good & Simple Tax (GST) that it was meant to be. Instead of moving towards simplicity, we are veering into complexity and irrationality.”

Insurance Sector Response

The insurance industry expressed disappointment over the deferral of GST cuts, particularly for term life insurance and senior citizen health policies.

Looking Ahead: Next Steps for GST Updates

Upcoming GoM Meeting

The GoM is expected to reconvene in January to finalize proposals on:

1. Insurance GST exemptions.
2. Rate rationalization for other products and services.

A Balancing Act for Revenue and Relief

The 55th GST Council Meeting showcased the government’s intent to refine taxation while ensuring state and central revenues remain robust. However, deferrals on critical issues like insurance GST and food delivery taxes reflect the complexity of achieving a balanced tax system.

Stakeholders across industries are keenly awaiting further updates in the next Council meeting, hoping for measures that simplify processes and address consumer concerns effectively.

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FAQs

1. What are the new GST rates for popcorn?

• Unpackaged popcorn with salt and spices: 5%
• Pre-packaged popcorn: 12%
• Caramel-coated popcorn: 18%

2. What was decided about GST on health and life insurance?
The Council deferred the decision and tasked a GoM with further deliberations on exemptions and rate adjustments.

3. Are there changes in GST for used cars and EVs?
Yes, GST on old and used vehicles, including EVs, has increased from 12% to 18%.

4. What exemptions were announced in the 55th GST Council meeting?
Exemptions include:

• Gene therapy treatments.
• Black pepper and raisins supplied by agriculturists.
• Penal charges by banks and NBFCs.

5. When is the next GST Council meeting?
The next meeting is expected in January 2025, where the GoM will present recommendations on insurance and rate rationalization.