The experts expect that the 54th meeting will discuss and make announcements on rate rationalisation, tax slab cuts, the removal of the inverted duty structure and more.
Reetu | Aug 29, 2024 |
Expectations from 54th GST Council Meeting going to be held on 9th September
The GST Council which is chaired by Finance Minister Nirmala Sitharaman is scheduled to meet on September 9, 2024. The experts expect that the 54th meeting will discuss and make announcements on rate rationalisation, tax slab cuts, the removal of the inverted duty structure, as well as lower rates for online gaming, insurance, and other sectors.
The upcoming GST Council meeting is likely to focus on numerous major issues. Rate rationalization and tax slab reductions for products such as hybrid autos, gaming, and consumer durables should be addressed. The Council may also discuss the inverted duty structure that affects products including paper, furniture, washing machines, solar glass, and air purifiers.
Another topic on the agenda could be the elimination of the compensation cess, which was implemented to help states during the GST transition. Furthermore, the GST implications for transactions between Indian enterprises’s foreign branch offices, particularly for foreign airlines and shipping lines, are expected to be addressed.
Expects also said, “While the government suggested a review of the gaming rate structure after six months, it was not addressed at the last meeting and can be reviewed at the present meeting as part of the general discussion on GST rates. Furthermore, there is a growing demand from all quarters for an exemption/reduction in the GST rate on health and life insurance, which the GST Council is likely to address at its next meeting.”
One of the most serious concerns expected to be addressed at the meeting is online gaming. The gaming companies say that the rates are overly high, thereby harming the sector’s growth.
Previously, online gaming companies charged 18% GST on platform fees, but at its 50th meeting on July 11, 2023, the GST Council approved to impose 28% GST rate on actionable claims in casinos, horse racing, and online gaming. And, despite certain states’ requests for reconsideration at the 51st GST Council meeting, the Council upheld its previous judgment.
Despite the industry’s efforts to argue for a decrease, the GST Council has shown no evidence of reducing online gambling rates. While user behaviour has not altered considerably as a result of the tax, one industry source claims that the high rate has contributed to a visible slowdown in the industry’s growth.
Hospital room rents exceeding Rs.5000 would be subject to GST beginning in July 2022. The key expectation that would be prioritized is the long-standing demand to reduce or eliminate GST on health and life insurance. Given the lack of an announcement on this issue during the Union Budget and ongoing pressure from numerous quarters, this could be implemented.
Middle-class people frequently hesitate to buy insurance, and current policyholders may even drop out. A reduction or elimination of the GST rate could indicate the start of a new era, making insurance more affordable and aligned with the IRDAI’s aim of “Insurance for All” in 2047.
These important issues are expected to be considered in the next GST Council meeting, especially because several ministers have raised worries about the current situation.
Experts believe that discussions about reducing the existing four primary GST slabs (5%, 12%, 18%, and 28%) to three slabs have been ongoing for some time and that such a move could simplify the tax structure and minimize compliance obligations, but it may also result in inflationary pressures.
Businesses are closely monitoring any advances in this area since a streamlined rate structure might have a substantial impact on pricing and profitability.
We anticipate that because rate setting is a complex exercise that requires assessment of macroeconomic and specific industry concerns, the issue will not be addressed in Council Meetings, but we may hear some announcements regarding the progress of this plan.
The GST Rate Rationalization Committee (RRC) was reconstituted in June 2024, following the election.
The entire sector believes that the meeting will jumpstart discussions and make progress on the critical issues of rate rationalization and tax slab reductions. Along with rate reduction, it is planned that the inverted tariff structure affecting businesses such as textiles, fertilizers, medicines, and electric vehicles will be addressed.
There has been an increase in GST notices issued to foreign airlines and IT firms such as Infosys regarding GST on the import of services between foreign branch offices, and experts believe that the government will provide relief or clarification on this issue to avoid further disputes and ease the burden on affected businesses.
Recently, it was revealed that GST authorities have made large GST demands to major IT industry participants as well as international airlines operating in the country. Such notices triggered a severe backlash from the industry. A system to avoid such circumstances, as well as the issues addressed in the preceding notices, may be explored, with a special emphasis on the GST levy on transactions with branch offices.
To improve the ease of doing business, the Council is anticipated to provide clarification on cross-border transactions involving Indian companies and foreign businesses, as well as vice-versa. This is expected to alleviate concerns in the IT, airline, and shipping industries, which have been disrupted by show-cause notices requiring GST on such transactions.
Other major expectations for the GST Council meeting include discussions about creating a standard or stable tax environment for developing sectors. Furthermore, the real estate sector hopes that the meeting will provide clarity and address pressing issues such as the taxability of redevelopment projects, the imposition of GST on the transfer of development rights in joint development agreements (JDA), a suitable structure for taxing such transfers, and the taxability of government-leased properties for more than 30 years.
Furthermore, experts believe there will be debates about the prospective inclusion of petrol and diesel in the purview of GST laws, as well as clarification on challenges encountered by companies such as online gaming and e-commerce.
The 54th GST Council meeting is expected to bring clarity on major issues such as rate rationalization and GST on petrol and diesel, according to the panel report. We anticipate rate reductions in certain sectors, such as online gaming. Further action to correct any existing inverted duty structure may be considered. If these changes are taken, the 54th GST Council might be a historic gathering that pave the way for a new, simpler indirect tax system.
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