54th GST Council Meeting Today: From Changes in GST Rates, Compensation Cess, To Cross-Border Transactions; What Can be Expect?

Finance Minister Nirmala Sitharaman will preside over the 54th GST Council meeting in New Delhi on September 9, 2024, i.e. today. During this meeting, the council is expected to provide relief to a variety of sectors, including insurance, gaming, automobiles, and more.

Furthermore, experts anticipate clarification on GST for cross-border transactions between Indian corporations and their international branches, as well as the future of the GST Compensation Cess.

Here’s what to expect from the GST Council during its 54th meeting:

Reduction of GST Rates on Life and Health Insurance

Experts said that the GST rates for life and medical insurance will be reduced. Despite being the world’s most populated country, India has among the lowest levels of life and medical insurance coverage per capita. Furthermore, the percentage of the Indian population with insurance coverage is far lower than that of several industrialized countries, including the United Kingdom and the United States.

The current GST rate on life and medical insurance premiums is 18%, which worsens the affordability problem. As a result, one of the main expectations for the 54th GST Council meeting is a reduction in tax rates or, preferably, a complete exemption from GST on life and health insurance premiums, he added.

“Although a complete exemption of GST on insurance premiums may pose challenges for the insurance industry due to potential ITC reversals under Rules 42 and 43 of the Central Goods and Services Tax Rules, 2017, the industry is optimistic that the 54th GST Council meeting will result in a substantial reduction of the GST rate from 18% to a lower rate such as 5% or even 0.1%. This reduction would lower the tax burden for both insurers and policyholders,” he noted.

GST on Cross-Border Transactions Between Indian Companies and their Foreign Branches

Transactions between Indian company branches and their international branches/head offices are often ambiguous. Challenges arose when the tax department issued GST notices worth crores of rupees to taxpayers such as Infosys and various foreign airlines such as British Airways, Lufthansa, and Emirates, primarily for unpaid GST on services imported by Indian branches from their head offices/branches outside India. As a result, clarification on these issues is expected at the 54th GST Council meeting.

Compensation Cess

According to the expert, the GST Compensation Cess was introduced to address the State’s concerns about a revenue shortfall following GST implementation. This provision was initially supposed to be temporary, lasting only the first five years after the GST was introduced. Later, the GST Council extended it until March 2026. The upcoming GST Council meeting will have the choice of discontinuing the cess collection or continuing it until March 2026.

Past Trends

Furthermore, according to the government-backed media website, the last GST Council meeting was conducted in June of this year, and the council suggested a uniform rate of 12% GST on all steel, iron, and aluminium milk cans. The council also proposed that services supplied by the Indian Railways to the citizens of India, such as platform ticket sales, retiring and waiting rooms, and battery-operated car services, be exempt from GST.

The GST Council, which consists of the Union Finance Minister and members from all States and Union Territories, was formed to make decisions on various areas of GST, such as tax rates, exemptions, and administrative procedures. It helped shape India’s GST framework.

On July 1, 2017, GST laws went into effect, eliminating a complicated web of central and state taxes. Under the Indian GST, goods and services are classified into four tax slabs: 5%, 12%, 18%, and 28%. Some critical commodities are excluded from GST, and gold and diamond-related jobs are subject to a low tax rate. A compensation cess is paid on depreciable goods and certain luxury items.