The Goods and Services Tax Council (GST), in its 55th Meeting held in Jaisalmer on Saturday, deferred the decision to lower tax rates for health and life insurance and food delivery fees charged by e-commerce companies such as Swiggy or Zomato. The council also discussed the inclusion of Aviation Turbine Fuel under GST but decided to defer a decision because most states did not want to lose their taxing rights.
The Council's explanation of why different types of popcorn, i.e. regular, salted, spiced and caramelised, are subject to different GST rates, was what caught the attention of many. Jairam Ramesh, a Congress spokesperson, called it "absolutely incredible" and "sheer nonsense".
The Council discussed taxes on popcorn that is ready to eat and mixed with spices and salt. The Council clarified and agreed that popcorn with spices and salt has the essential characteristics of namkeen, and therefore should be subject to a 5 percent GST (others than pre-packaged products). If the popcorn is packaged and labelled, then the GST rate should be 12 percent. If mixed with sugar, (e.g. Caramel popcorn was considered a sugar confectionery item (items that have 'added' sugar) and would therefore attract GST of 18%.
There is no new tax being imposed in this case. It is only a clarification, as some field units demanded different tax rates. The GST Council is therefore recommending a clarification to settle disputes that arise from interpretation," said an official statement. The GST Council has decided to normalise the taxation of popcorn in the past, on an "as-is" basis.
The Group of Ministers on Rate Rationalisation (GoM) requested more time to discuss the proposed rate changes for up to 148 items. This will be discussed by the Council at a later date. Council also gave the GoM on compensation cess an extension to make its recommendations.
It's (rate-rationalisation) an exercise that looks at the whole picture of reducing the burden for everyday items. Rates will need to be reduced from the current levels for more than five years. All agreed on a certain level of stabilisation. They are looking at the issue in a holistic manner," said Union Finance Minister Nirmala SITHARMAN after the Council Meeting.
The GST Council has recommended that the GST rate for used electric vehicles be harmonised at 18%. Sitharaman stated that the Council had decided to increase the tax rate on all used EVs to 18% from 12 percent, as it did for non-electric cars.
No GST will be charged on the sale of used EVs to individuals. For the sale of used EVs outside of individuals, GST of 18% will be levied. This is the difference between the price of the vehicle and the selling price, or the depreciated value if it is claimed. "At the moment, new EVs attract a 5 percent GST. The Centre, with 1/3rd of the voting rights, proposed that GST be 5% on used and old EVs. After a thorough deliberation it was decided to charge 18% on the selling price of old and used EVs," Sitharaman stated.
The GST Council also recommended that there will be no GST payable on penalties levied by banks and NBFCs against borrowers who do not comply with the loan terms or default on loans. The Council recommended a reduction of the GST rate for fortified rice to 5 percent from 18 percent, regardless of the end use. They also decided to grant an exemption for gene therapies.
GST Council has approved in principle a concept note on the registration issues of small companies. Sitharaman stated that this may require changes to GST laws in order to make it easier to register small businesses.
A decision has not been made on the taxation of charges for food delivered by platforms such as quick commerce or food delivery. Sitharaman stated that the Fitment Committee would review the matter again. The Fitment Committee is currently debating whether the tax on food should be equal to the GST of 5 percent or higher.
Samrat Chaudhary (Bihar's Deputy chief minister), who is also convenor of ministerial panel on rate rationalisation, insurance premiums and other issues, said earlier in the day that many ministers felt that a second meeting was needed to discuss in depth the issue before the final submission of GoM report. We will hold another meeting to discuss the issue, whether it's for senior citizens insurance, group insurance or individual insurance. "We will cover it all at the next meeting," Chaudhary stated.
Council discussed the inclusion of ATF in the GST ambit. The matter will be further discussed later. The Council discussed a special request by Andhra Pradesh for a discussion on levying an additional 1 percent GST above the 28 per cent top rate in case disasters. This is similar to the flood cess imposed by Kerala in 2019. The GST Council decided to refer the discussion on a special tax for disasters to an GoM.
According to sources, there was no consensus reached in the GoM meetings on insurance premiums. Some states were worried about revenue losses for the states due to the proposed GST rate reduction. We are also awaiting comments from the insurance regulator IRDAI on this issue.
GoM discussed earlier exempting GST from premiums for senior citizens who pay for health insurance, and for all term life insurance premiums. The GST exemption on term insurance premiums was discussed for all people, including family plans. The exemption of senior citizen health insurance premiums, regardless of coverage, was also being considered.
Health insurance coverage up to Rs 5 lakh was exempted for other citizens. For health insurance coverage above Rs 5 lakh, the existing 18% rate would have continued.
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