54th GST Council Meet: From GST Rates, Compensation Cess, To Cross-Border Transactions, What To Expect?

Finance Minister Nirmala Sitharaman will lead the 54th GST Council meeting in New Delhi on September 9, 2024. In this meeting, the council is expected to offer a host of relief to various sectors including insurance, gaming, automobile and others. Further, experts are expecting clarification on GST for cross-border transactions between Indian companies and their foreign branches, and the future of the GST Compensation Cess.

Here's what to expect from the GST Council in the 54th Meeting:

Reduction of GST rates on Life and medical insurance:

Shivashish Karnani, Head of GST at Dewan P.N. Chopra & Co said that reduction of GST rates on Life and medical insurance: said, Despite being the world's most populous country, India ranks among the lowest in terms of life and medical insurance coverage per capita. Also, the percentage of the Indian population with insurance coverage is substantially lower than that of many developed nations like the United Kingdom and the United States."

The current GST rate on life and medical insurance premiums is 18% which further accelerates the affordability issue. Consequently, one of the key expectations from the 54th GST Council meeting is a reduction in tax rates or, ideally, the complete exemption of GST on life and health insurance premiums, he said.

"While a complete exemption of GST on insurance premiums might lead to challenges for the insurance industry due to potential ITC reversals under Rules 42 and 43 of the Central Goods and Services Tax Rules, 2017, the industry is hopeful that the 54th GST Council meeting will result in a significant reduction of the GST rate from 18% to a lower rate such as 5% or even 0.1%. This reduction would alleviate the tax burden on both insurers and policyholders," Karnani added.

2. GST on Cross-Border Transactions Between Indian Companies and their Foreign Branches:

According to Karnani, there is a lot of ambiguity in the transactions between branches of Indian companies and their foreign branches/head offices. Challenges arose when the tax department issued GST notices for crores of rupees to taxpayers such as Infosys, and various foreign airlines including British Airways, Lufthansa, and Emirates, primarily related to unpaid GST on the import of services by Indian branches from their head offices/branches outside India. Therefore, clarification on these matters is expected from the upcoming GST Council meeting.

Compensation Cess:

Further, Karnani stated that the GST Compensation Cess was incorporated to address the State's concerns & belief of revenue shortfall post-GST implementation. This measure was initially temporary and only intended to last for the initial five years of GST inception. Later it was further extended by the GST council till March 2026. The ensuing GST Council meeting has the option to either stop collecting the cess or continue it till March 2026.

Moreover, as per the government-backed media website NewsOnAir, the last GST Council meeting was held in June this year, in which the council recommended a uniform rate of 12 per cent GST on all steel, iron, and aluminium milk cans. The council had also recommended that services provided by the Indian Railways to the common man, including the sale of platform tickets, the facility of retiring rooms and waiting rooms, and battery-operated car services, will not attract any GST.

The GST Council, consisting of the Union Finance Minister and representatives from all States and Union Territories, was established to make decisions on various aspects of GST, including tax rates, exemptions, and administrative procedures. It played a crucial role in shaping the GST framework in India. On July 1, 2017, GST laws were implemented, replacing a complex web of Central and State taxes. Under the Indian GST, goods and services are categorized into different tax slabs, including 5%, 12%, 18%, and 28%. Some essential commodities are exempted from GST, and Gold and job work for diamonds attract a low rate of taxation. A compensation cess is being levied on demerit goods and certain luxury items.