GST rates changed for some items in pre-Budget meeting; full list here

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Union Finance Minister Nirmala Sitharaman chaired pre-Budget consultations with finance ministers from various states and Union Territories to gather their perspectives. This important session was followed by the 53rd meeting of the GST (Goods and Services Tax) Council.

One of the notable decisions taken by the GST Council is the exemption of GST on services related to hostel accommodation outside educational institutions, provided the cost does not exceed Rs 20,000 per person per month. This exemption comes with a condition: the student must have stayed in the hostel for a continuous period of at least 90 days. This stipulation aims to prevent hotels from exploiting the tax exemption meant for student accommodation.

In another significant recommendation, the GST Council proposed a waiver of interest on penalties related to tax demand notices. This decision is anticipated to provide considerable relief to taxpayers facing financial penalties, alleviating some of their financial burdens.

Furthermore, the Council decided to exempt the purchase of railway tickets and payments for waiting room and cloak room charges from GST. This move is expected to ease travel-related expenses for passengers. Additionally, services provided by battery-operated vehicles and intra-railway services will also be exempt from GST, reflecting the Council’s commitment to making public transportation more affordable and eco-friendly.

The Council also recommended implementing a uniform GST rate of 12 percent on milk cans. This uniform rate is intended to simplify the tax structure within the dairy industry, making compliance more straightforward and reducing the likelihood of errors or confusion associated with varying tax rates.

During the pre-Budget meeting, Finance Minister Sitharaman reiterated the Centre’s dedication to supporting states through timely tax devolution and the disbursement of GST compensation arrears. These measures are crucial for enabling states to fund development projects and public services, thus driving economic growth.

Sitharaman also encouraged states to take full advantage of the Centre’s scheme offering 50-year interest-free loans for undertaking specified reforms. “The Centre remains committed to supporting states in their developmental endeavors,” she stated. By leveraging this scheme, states can access substantial financial resources without the burden of interest payments, allowing them to invest in critical sectors such as infrastructure, education, and healthcare.

The pre-Budget consultations and the decisions made during the GST Council meeting represent a strategic approach to economic management. By providing immediate financial relief, standardizing tax rates, and ensuring states have access to interest-free loans, the Centre aims to foster a conducive environment for sustained economic growth and development.

Overall, these initiatives reflect a coordinated effort to strengthen the Indian economy by easing financial pressures on businesses and individuals, simplifying tax compliance, and providing states with the necessary resources to implement meaningful reforms and development projects.

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Recommendations relating to GST rates on Goods

Changes in GST rates of goods

1. A uniform rate of 5% IGST will apply to  imports of ‘Parts, components, testing equipment, tools and tool-kits of aircrafts, irrespective of their HS classification to provide a fillip to MRO activities subject to specified conditions.
2. All milk cans (of steel, iron and aluminium) irrespective of their use will attract 12% GST.
3. GST rate on ‘carton, boxes and cases of both corrugated and non-corrugated paper or paper-board’ (HS 4819 10; 4819 20) to be reduced from 18% to 12%.
4. All solar cookers whether single or dual energy source, will attract 12% GST.
5. To amend existing entry covering Poultry keeping Machinery attracting 12% GST to specifically incorporate “parts of Poultry keeping Machinery” and to regularise past practice on ‘as is where is’ basis in view of genuine interpretational issues.
6. To clarify that all types of sprinklers including fire water sprinklers will attract 12% GST and to regularise the past practice on ‘as is where is’ basis in view of genuine interpretational issues.
7. To extend IGST exemption on imports of specified items for defence forces for a further period of five years till 30th June, 2029.
8. To extend IGST exemption on imports of research equipment/buoys imported under the Research Moored Array for African-Asian-Australian Monsoon Analysis and Prediction (RAMA) programme subject to specified conditions.
9. To exempt Compensation Cess on the imports in SEZ by SEZ Unit/developers for authorised operations w.e.f. 01.07.2017.

Other Miscellaneous Changes

10. To exempt Compensation cess on supply of aerated beverages and energy drinks to authorised customers by Unit Run Canteens under Ministry of Defence.
11. To provide Adhoc IGST exemption on imports of technical documentation for AK-203 rifle kits imported  for  Indian Defence forces.

 Recommendations relating to GST rates on services

1. To exempt the services provided by Indian Railways to general public, namely, sale of platform tickets, facility of retiring rooms/waiting rooms, cloak room services and battery-operated car services and to also exempt the Intra-Railway transactions. The issue for the past period will be regularized from 20.10.2023 to the date of issue of exemption notification in this regard.
2. To exempt GST on the services provided by Special Purpose Vehicles (SPV) to Indian Railway by way of allowing Indian Railway to use infrastructure built & owned by SPV during the concession period and maintenance services supplied by Indian Railways to SPV. The issue for the past will be regularized on ‘as is where is’ basis for the period from 01.07.2017 till the date of issue of exemption notification in this regard.
3. To create a separate entry in  notification No. 12/2017- CTR 28.06.2017 under heading 9963 to exempt accommodation services having value of supply of accommodation up to Rs. 20,000/- per month per person subject to the condition that the accommodation service is supplied for a minimum continuous period of 90 days. To extend similar benefit for past cases.

 Other changes relating to Services

4. Co-insurance premium apportioned by lead insurer to the co-insurer for the supply of insurance service by lead and co-insurer to the insured in coinsurance agreements, may be declared as no supply under Schedule III of the CGST Act, 2017 and past cases may be regularized on ‘as is where is’ basis.
5. Transaction of ceding commission/re-insurance commission between insurer and re-insurer may be declared as no supply under Schedule III of CGST Act, 2017 and past cases may be regularized on ‘as is where is’ basis.
6. GST liability on reinsurance services of specified insurance schemes covered by Sr. Nos. 35 & 36 of notification No. 12/2017-CT (Rate) dated 28.06.2017 may  be regularized on ‘as is where is’ basis for the period from 01.07.2017 to 24.01.2018.
7. GST liability on reinsurance services of the insurance schemes for which total premium is paid by the Government that are covered under Sr. No. 40 of notification No. 12/2017-CTR dated 28.06.2017 may  be regularized on ‘as is where is’ basis for the period from 01.07.2017 to 26.07.2018.
8. To issue  clarification  that retrocession is  ‘re-insurance of re-insurance’  and therefore, eligible for the exemption under Sl. No. 36A of the notification No. 12/2017-CTR dated 28.06.2017.
9. To issue  clarification  that statutory collections made by Real Estate Regulatory Authority (RERA) are exempt from GST as they fall within the scope of entry 4 of No.12/2017-CTR dated 28.06.2017.
10. To issue clarification that further sharing of the incentive by acquiring bank with other stakeholders, where the sharing of such incentive is clearly defined under Incentive scheme for promotion of RuPay Debit Cards and low value BHIM-UPI transactions and is decided in the proportion and manner by NPCI in consultation with the participating banks is not taxable.