NCP (SP) MP Supriya Sule. File
| Photo Credit: PTI

Ahead of the 54th GST Council meeting on Monday (September 9, 2024), NCP (SP) MP Supriya Sule has called for urgent action on various issues related to GST rates, including the need to rationalise taxes on essential goods and services, particularly in the sectors of food, healthcare, education, and renewables, amidst rising unemployment, food inflation, and a slowing GDP growth rate.

“Given the current economic climate, it is essential that the government eases the financial burden on our citizens by rationalising taxes on important goods and services,” she said.

Speaking to The Hindu, Ms. Sule targeted her cousin, Maharashtra’s finance minister, Ajit Pawar, over his repeated absence from previous GST Council meetings.

“As the sole representative of Maharashtra’s 13 crore citizens, the finance minister’s absence has left the State without a voice on crucial GST-related decisions,” she said, urging Mr. Pawar to attend the meeting to advocate for State’s interests.

Focusing on the soaring food inflation, she reiterated her demand for the removal of GST on essential commodities like pulses, cereals, and dairy products. She called the 12% GST on dairy items such as butter and ghee “unacceptable.” “The 12% GST rate on butter, ghee, and other dairy products is simply unacceptable,” the four-time MP from Pune’s Baramati said.

Agriculture, another critical area, saw a mere 2% growth in the first quarter of 2024, she said. “This is not a temporary dip; agriculture has been in a long-term slump for the past decade. High GST rates on essential agricultural products, such as fertilisers and machinery, have exacerbated the distress in the sector. If we are to revive agriculture in India, there must be 0% GST on the entire sector,” Ms. Sule, daughter of NCP (SP) supremo Sharad Pawar, and the party’s national working president, said.

She urged Union Finance Minister Nirmala Sitharaman to also reduce GST rates on healthcare products and services, particularly for senior citizens. “India’s out-of-pocket health expenditure continues to hover around 50%, a staggeringly high figure compared to the global average of 17.05%. The government must work to ease this burden of healthcare costs on our citizens by reducing the high GST rates on various healthcare products and services, particularly for senior citizens,” she said.

The 18% GST on medical insurance is disproportionately impacting senior citizens, she said, quoting Union Minister Nitin Gadkari’s statement that it “amounts to taxing individuals seeking cover against life’s uncertainties.”

Ms. Sule urged the government to lower the GST on medical insurance for senior citizens from 18% to 12%, as recommended by the Standing Committee on Finance in February.

If the Insurance Regulatory and Development Authority of India’s target of ‘Insurance for All by 2047’ is to be met, it is imperative that the government reduce the GST rate on medical insurance for senior citizens from 18% to 12%, she said.

The Baramati MP also called for life-saving drugs and medical equipment to be exempted from GST, arguing that it would “provide great relief to patients and incentivize domestic production.”

She further criticised the imposition of 18% GST on private schools, higher education institutes, and EdTech platforms, stating that it places a significant financial burden on parents. “The government should lower the GST on these products to make education more affordable,” she added.

Speaking about the issue of consumer demand, she said the government should cut down the GST on essential appliances from 12% to 5% and on aspirational appliances from 28% to 18%. She also called for a rationalisation of GST on electric vehicles and related technologies to promote investment in battery-swapping infrastructure. “There is disparity in GST rates for EVs with and without batteries, and for lithium-ion batteries sold separately. This difference in GST rates disincentives investment in battery-swapping technology.”

She also said there is need to support handloom weavers, whose livelihoods were severely impacted by the COVID-19 pandemic. “Handloom clothes and raw materials must be exempted from GST to alleviate their financial distress,” she said, adding that with the current political landscape, there should be no obstruction in implementing these changes, except a lack of will.

Bharatiya Janata Party (BJP) leader Nirmala Sitharaman arrives to assume charge as the Union Finance Minister, at the Ministry of Finance in New Delhi on June 12, 2024.
| Photo Credit: ANI

The Centre has decided to convene a meeting of the Goods and Services Tax (GST) Council on June 22, eight-and-a-half months after its last meeting, the Finance Ministry said on June 13, 2024.

“The 53rd meeting of the GST Council will be held on 22nd June, 2024 at New Delhi,” a ministry statement informed.

The Council that is generally expected to meet every quarter, has met just six times since 2022.

The agenda for the upcoming meeting is not known yet but State Finance Ministers can be expected to flag suggestions for the indirect tax regime that can be incorporated in the Union Budget likely to be presented next month.

Industry will also be keen for signals from the Council on the revival of a plan to restructure the complex multiple-rate tax structure, now that GST revenues have risen significantly, along with a promised review of the 28% levy on bets made in online gaming, casinos, and horse racing.

Consumers and industry would also be eyeing some visibility on the future of the GST Compensation Cess that was originally meant to be levied for the first five years of the GST regime that began in July 2017. The levy of the Cess, used to recompense States to come on board, had been extended after the pandemic.

At its last meeting held on October 7, 2023, the Council, headed by the Finance Minister, had initiated discussions on a “perspective plan” to impose a cess or surcharge on top of GST levies after March 2026, when the GST Compensation Cess is due to expire. The Council had then decided to meet in the future to discuss a replacement levy for the Cess and how those funds could be used.

Implementation of Bommai report

To rationalise and rejig multiple GST rates and simplify the tax structure, the Council had set up a group of ministers (GoM) under former Karnataka Chief Minister Basavaraj Bommai in late 2021. Some initial recommendations of the ministerial panel to withdraw exemptions and concessional rates on several items had been accepted by the GST Council in June 2022.

However, the panel did not move forward on its broader rate rationalisation mandate, with officials citing high inflation and revenue considerations as key factors to put the exercise on the backburner. The GoM also remained in suspended animation after Mr. Bommai’s party lost the Karnataka assembly polls last May. The GoM was reconstituted in late 2023 with Uttar Pradesh Finance Minister Suresh Kumar Khanna as its convenor.

Apart from broader reforms to the indirect tax regime, tax experts also hope for resolution of some long-pending operational issues and challenges at the upcoming meeting.

“Multiple clarifications are being looked after to including taxability for the online gaming sector before October, taxability of ESOPs, corporate guarantee taxability, and various rate-related clarifications are also anticipated due to recent litigations,” said Abhishek Jain, indirect tax head and partner at KPMG. 

Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary, Revenue Secretary Sanjay Malhotra and others during the 52nd Goods and Services Tax (GST) Council Meeting, in New Delhi, on October 7, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council has decided to raise the maximum age limit for the president and members of the GST Appellate Tribunals, Finance and Corporate Affairs Minister Nirmala Sitharaman announced after the 52nd Council meeting.

The president can have a tenure up to the age of 70, raised from 67 earlier, while the cap for members has been raised from 65 to 67. The minimum age of appointment, which was not specified earlier, is now recommended to be 50 years.

“We wanted it to be clear that advocates with up to ten years of experience must be minimum for consideration to become judicial members of the tribunals,” said Ms. Sitharaman.

The GST Council also decided that food preparations of millet flour in powder form, with at least 70% of the composition as millets in the blend, will have a 0% GST if sold loose or packed without any branding and labelling, and 5% only if sold pre-packaged and in a labelled form.

Taxing extra-neutral alcohol

Another critical decision taken that Ms. Sitharaman said would have major implications in Centre-State ties was that though the GST Council had, by law, the right to tax the extra-neutral alcohol (ENA), the Council has ceded that right to tax ENA to the States.

“It’s States’ decision now to tax it or not to,” she said. “This has been done in the interest of the States.”

The Allahabad High Court had earlier ruled that States had lost their competence to levy a tax on ENA.

The GST on molasses has been reduced from 28% to 5%, which the Minister said would benefit sugarcane farmers and will enable them to get paid faster from the sugar mills.

“We also believe that it will reduce the cost of cattle feed. The GST rate notification will be amended to create a new entry for extra-neutral alcohol for industrial use and that shall attract 18% tax,” she said.

On services, in order to promote tourism, the Council has given a conditional exemption to foreign-flag, foreign-going vessels, from the levy of Integrated GST, if they convert temporarily for a coastal run.

“In other words, for the next couple of months, in the winter, let’s say foreign run vessels do cruise tourism along India’s coast, we have decided to exempt them from 5% IGST normally levied. This will promote tourism particularly on the Western coast, from Mumbai to Kochi, and even the eastern coast,” said Ms. Sitharaman.

Union Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary and Revenue Secretary Sanjay Malhotra during the 51st Goods and Services Tax (GST) Council Meeting, in New Delhi, on August 2, 2023.
| Photo Credit: PTI

The GST Council on August 2 blinked a little on technicalities and kept the door open for a review down the road, but stuck to its earlier decision to impose a 28% levy on the full face value of bets placed on online gaming, casinos and horse racing, with an eye on implementing it from October 1.

Finance Minister Nirmala Sitharaman, who chaired the Council’s meeting, said the Centre would now strive to amend the Goods and Services Tax (GST) law in Parliament’s current session itself to enable the implementation of the levy, despite dissent from Sikkim and Goa over the modalities of the tax for casino users.

Tamil Nadu Finance Minister Thangam Thennarasu raised concerns about the levy’s impact on the State-wide ban on online gaming, which Ms. Sitharaman said would be addressed in the language of the new norms to explicitly state the tax cannot be levied where a ban is in place.

Also read: Explained | Will 28% GST on online gaming affect its growth? 

Delhi government’s representative sought a fresh review for the online gaming sector, but most other States leaned towards sticking to the Council’s decision last month which had been taken after three years of deliberations, the Finance Minister conveyed after the virtual meeting.

The online gaming industry, which had termed the Council’s decision a death knell endangering billions of dollars of investments and thousands of jobs in the sunrise sector, remained anxious but appreciated a critical clarification on the valuation rules for the 28% levy, approved by the Council on Wednesday.

Simply put, if someone enters a casino by buying chips worth ₹1,000, plays a round and wins ₹300, the tax will not be levied on ₹1,300, but on the entry amount of ₹1,000 alone, Ms. Sitharaman explained. In a joint statement, the E Gaming Federation and Federation of Indian Fantasy Sports welcomed this would address their concerns of “repeat taxation”.

“The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India,” they added.

“…Because Goa and Sikkim [who wanted the 28% levy on casino bets to apply on gross gaming revenue and not the entire face value] kept appealing that they were small States and needed consideration, the Council agreed to come back after six months after implementation to review the way in which this is getting implemented,”

Revenue Secretary Sanjay Malhotra hinted the scope of the review will likely be limited to issues about valuation and the tax rates, which can be tweaked through notifications and rules, while the GST law changes will be broader “enabling provisions”.

Apart from the central GST law amendments, States will also have to amend their GST laws for the new tax to kick in, but Ms. Sitharaman expressed hope it can be implemented from October 1.

While the changes will not be retrospective per se, Mr. Malhotra emphasised they are more in the nature of a clarification because betting, gambling and lottery are already included as actionable activities under the GST law.

The Revenue Department believes online gaming, horse racing and casinos are also in the nature of betting only, he said. The High Court of Karnataka has not upheld that stand, dismissing a ₹21,000 crore tax demand against Gameskraft Technologies. “We have filed a special leave petition on the matter yesterday [Tuesday] and whatever the Supreme Court decides, will prevail,” the Revenue Secretary said.

Union Finance Minister Nirmala Sitharaman with Revenue Secretary Sanjay Malhotra during the 50th Goods and Services Tax (GST) Council Meeting at Vigyan Bhawan, in New Delhi, on July 11, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council, at its 50th meeting on July 11, reduced or clarified the tax rate on some items ranging from uncooked or unfried snack pellets to special utility vehicles (SUVs), exempted imported drugs to treat cancer and rare diseases, and brought an end to a years-long debate on tax treatment of online gaming, casinos and horse racing.

Whether they involve skill or chance, or both or neither, bets and wagers made on all three activities, will attract a 28% levy and the GST laws will be amended to include online gaming, Finance Minister Nirmala Sitharaman said.

The Council also examined States’ proposals to set up 50 Benches of the much-awaited GST Appellate Tribunals in the country. The government has said that the statutory bodies to resolve mounting GST disputes shall become operational within four to six months, with Benches coming up in State capitals as well as places where High Courts have Benches, to begin with. The Council cleared the appointment and service conditions for tribunal members and the president, which will kick in from August 1.

The first meeting of the Council since February got off to a stormy start. Representatives of States not ruled by the BJP criticised the Union government’s recent decision to bring the GST Network under the purview of the Prevention of Money Laundering Act (PMLA), administered by the Enforcement Directorate (ED). The arguments were led by the Finance Ministers of Delhi and Punjab.

Ms. Sitharaman, who chaired the meeting, said many States had raised concerns about the issue and it was discussed after the listed agenda was concluded. Tamil Nadu, for instance, said that the inclusion of GSTN under the PMLA provisions is against the interests of taxpayers and against the basic objective of decriminalising the offences under the GST law.

Also read | Real money gaming industry reacts with shock to GST on deposits

“As this would affect the dealers across the country, especially small dealers, Tamil Nadu opposes the move,” a press statement from the State government said.

Revenue Secretary Sanjay Malhotra presented an explanation of the new provision to the Council, which he said members seemed “quite satisfied with”.

“This notification has been issued under Section 66 of the PMLA and has nothing to do with the GST law. It has been issued as it is a requirement of the Financial Action Task Force and our evaluation is under process,” he said.

Dispelling doubts that the GSTN is now going to share information about private businesses with other law enforcement agencies, including the ED, Mr. Malhotra said the ED will neither be receiving nor providing information.

“It was also clarified that this notification will empower our tax authorities with more information. The director of the Financial Intelligence Unit will provide information to the GSTN to empower the authorities wherever it feels there is a chance of tax evasion or money laundering; this information can be used as they deem fit,” he said.

The GST rate on uncooked, unfried snack pellets and fish soluble paste was slashed from 18% to 5%, while imitation zari threads or yarn will now attract 5% GST instead of 12%. The Council also decided that food and beverages consumed inside cinema halls shall attract 5% GST without any input tax credits, as opposed to 18% levied on cinema services.

The tax treatment on SUVs, which attract a higher GST compensation cess on top of the 28% GST levy, was also clarified taking into account concerns expressed by Tamil Nadu and Punjab that the higher cess levy must not affect sedans.

“Till now, for a vehicle to be categorised as SUV with higher compensation cess — four conditions had to be met. They had to be generally considered an SUV, were longer than four metres, with an engine of 1500 cc or more, and a ground clearance of 170 mm,” said the Revenue Secretary.

The Council has decided to scrap the condition that the vehicle should be popularly seen as an SUV, and clarified that the ground clearance of 170 mm should be of an unladen vehicle.

“On services, we have offered exemption on GST for satellite launch services provided by private organisations,” Ms. Sitharaman said.