GST Council Approves Key Reforms, Defers Insurance Premium Tax Cuts
The GST Council, chaired by Finance Minister Nirmala Sitharaman, held its 55th meeting and made crucial decisions to streamline taxation and curb tax evasion while deferring some key proposals.
GST Council introduces a track and trace system to curb tax evasion, clarifies tax rates, and exempts key services while deferring decisions on insurance premium tax cuts and calamity cess.
Key Reforms and Deferred Decisions
- The council approved a track and trace mechanism to combat tax evasion but deferred the decision on reducing tax rates for insurance premiums, pending inputs from IRDAI.
- A Group of Ministers (GoM) was formed to examine Andhra Pradesh’s proposal for a 1% calamity cess on luxury goods for disaster mitigation.
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Track and Trace Mechanism
- A Unique Identification Mark (UIM) will be affixed on specified goods to trace them across the supply chain.
- The mechanism requires an amendment to the CGST Act, 2017, with the insertion of Section 148A.
- This system is expected to strengthen the legal framework and reduce tax evasion.
Taxation Decisions
- Popcorn GST Clarification: Pre-packed and labelled popcorn will attract 12% GST, while caramelized popcorn is taxed at 18%. A CBIC circular will ensure uniform understanding.
- Fortified Rice Kernel (FRK): GST reduced from 18% to 5%, supporting affordability and nutrition initiatives.
- Gene Therapy: Fully exempted from GST to promote accessibility to advanced medical treatments.
- Merchant Exports: Compensation cess on supplies to merchant exporters reduced to 0.1%.
- IAEA Equipment: IGST exemption granted for specific equipment imported by the International Atomic Energy Agency’s inspection teams.
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Other Exemptions and Clarifications
- Third-Party Motor Vehicle Premiums: Contributions to the Motor Vehicle Accident Fund are now GST-exempt, benefiting accident victims.
- Vouchers: Clarified as neither goods nor services, making them GST-exempt.
- Bank Penal Charges: Penalties imposed by banks and NBFCs for non-compliance with loan terms will not attract GST.
Procedural Reforms
- Pre-Packaged Commodities: Updated definitions align with the Legal Metrology Act, covering retail sale items up to 25 kg or 25 litres.
- Online Services Compliance: Suppliers of online gaming and OIDAR services must record the recipient’s state on invoices.
- Pre-Deposit for Appeals: Pre-deposit requirements for penalty-only cases have been reduced to ease the appeal process.
Steps Toward Simplification
- Circulars will be issued to clarify GST compliance ambiguities and disputes.
- These reforms aim to simplify the GST regime, improve compliance, and strengthen enforcement.
With bold reforms and deferred decisions, the GST Council continues to refine India’s tax system. Discover how these updates impact compliance, businesses, and taxpayers alike. Finance Minister Sitharaman lauded the decisions as a step toward a taxpayer-friendly ecosystem, enhancing clarity and revenue collection while addressing industry concerns.
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Disclaimer: This blog is solely for educational purposes. The securities/investments quoted / information here are not recommendation.
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