54th GST Council Meeting, Key Decisions, GST Rate Revisions, and Impact

The 54th GST Council Meeting held on September 9, 2024, led by Union Finance Minister Nirmala Sitharaman, significantly shaped India’s tax policy. This meeting focused on tax rate revisions, relief for industries, and technological upgrades to the GST system, to improve compliance and ease the tax burden on key sectors. Here’s a detailed breakdown of the key decisions and their implications.

Key Highlights of the 54th GST Council Meeting

1. Phased Implementation of E-invoicing for B2C Transactions

One of the standout announcements in the 54th GST Council Meeting was the phased implementation of e-invoicing for Business-to-Consumer (B2C) transactions. This is a significant step aimed at reducing tax evasion and bringing transparency to the system. E-invoicing, which is already mandatory for Business-to-Business (B2B) transactions for entities with an annual turnover of ₹5 crore or more, will now be extended to B2C transactions.

• Expected Outcome: The extension of e-invoicing to B2C transactions is likely to curb the generation of false invoices and unreported sales, thereby increasing GST compliance and revenue collection for the government.

2. No Change in GST Rate for Online Gaming

The 54th meeting reaffirmed the decision taken in the 50th GST Council Meeting to levy a 28% GST on online gaming, casinos, and racecourses. Despite concerns raised by the gaming industry, the Council decided to maintain the 28% tax on the entire face value of online gaming transactions.

• Impact: The decision aligns with the government’s efforts to ensure that the gaming industry contributes fairly to the tax revenue, but it has also raised concerns about the potential negative impact on the growth of the gaming sector.

3. Formation of New Groups of Ministers (GoMs)

The Council established two new Groups of Ministers (GoMs) to tackle important issues:

• GoM on Medical and Health Insurance Rates: This GoM will examine GST rates for medical insurance premiums and make recommendations to reduce the tax burden on consumers.
• GoM on Compensation Cess: This group will study the current status of the compensation cess and suggest ways to address the revenue shortfall faced by states.
• Significance: These GoMs are expected to offer critical insights for rate rationalisation in essential sectors and ensure that states are adequately compensated for their revenue losses.

4. Relief for Foreign Airlines

The meeting also provided a major relief to foreign airlines operating in India. The Integrated GST (IGST) on the import of aircrafts was rationalised to ease the burden on foreign airlines, promoting investment in the aviation sector.

• Impact: This move is expected to encourage foreign airlines to increase their fleet size and enhance operations in India, leading to greater competition and better air travel services for consumers.

Major GST Rate Changes Announced

Several changes to the GST rates were approved during the meeting, aimed at addressing issues in sectors ranging from healthcare to food products. Key changes include:

1. Life-saving Cancer Drugs: The GST on crucial cancer drugs like Trastuzumab Deruxtecan, Osimertinib, and Durvalumab was reduced from 12% to 5%.
   • Benefit: This reduction will lower the treatment cost for cancer patients, providing relief to families struggling with high medical bills.
2. Namkeens and Savoury Food Products: The GST on these popular consumer goods was cut from 18% to 12%.
   • Consumer Impact: The reduced rate will make these items more affordable and is expected to increase consumption, aiding the food manufacturing sector.
3. Helicopter Passenger Transport: GST on helicopter passenger transport services was brought down from 18% to 5%, promoting regional connectivity and tourism.
   • Sector Impact: This rate cut is seen as an incentive to boost the aviation industry, especially in the UDAN scheme (Ude Desh Ka Aam Nagrik) and hilly areas, improving connectivity to remote regions.

Technological and Compliance Enhancements

The GST Council also introduced several technological enhancements aimed at improving compliance:

• Invoice Management System: An Invoice Management System (IMS) was launched to assist businesses in managing their invoices effectively and comply with GST regulations.
• RCM and ITC Ledgers: Two additional ledgers, the Reverse Charge Mechanism (RCM) ledger and the Input Tax Credit (ITC) Reclaim ledger, were introduced to ensure greater transparency and accountability in tax filings.

Compensation Cess Extension 

The Council deliberated on the issue of compensation cess and decided to extend the levy on luxury goods like cars and tobacco until March 2026. This is intended to help states repay the loans taken during the COVID-19 pandemic when the Centre had borrowed to make up for the revenue shortfall caused by GST implementation.

Other Key Announcements

• Exemption for Research Funding: The GST Council also decided to exempt funding provided by states to universities and research centres for research purposes from GST. This will encourage more research and development activities across various sectors.

Impact on the Indian Economy 

The decisions taken in the 54th GST Council Meeting are expected to have a broad impact on several sectors of the economy. The phased implementation of e-invoicing for B2C transactions is likely to significantly increase GST compliance, thereby boosting government revenues. The rate cuts on essential drugs and transport services will provide relief to consumers and encourage spending, while the relief to foreign airlines will stimulate growth in the aviation sector.

The overall policy framework discussed in this meeting reflects the government’s efforts to balance revenue collection with the need to support various sectors of the economy. By addressing key issues such as online gaming taxation, foreign airline operations, and healthcare costs, the GST Council aims to streamline tax policies and promote a more business-friendly environment.

Conclusion

The 54th GST Council Meeting brought about several critical changes aimed at improving GST compliance and addressing issues in various sectors of the economy. From healthcare to online gaming, the decisions taken will have far-reaching implications for businesses, consumers, and the government’s revenue collection strategy. The focus on rate rationalisation and technological upgrades reflects the government’s commitment to enhancing the ease of doing business and ensuring equitable tax collection across the country.

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