Key Decisions and Rate Adjustments from the 25th GST Council Meeting

The 25th Goods and Services Tax (GST) Council convened on January 18, 2018, at Vigyan Bhawan in New Delhi. The council's recommendations regarding rate modifications, exemptions, and other proposals were scheduled for implementation upon the issuance of relevant notifications.

Recent Council Meeting Updates

Subsequent GST Council meetings have addressed various tax-related matters.

• 47th GST Council Meeting (June 24, 2022): Held on June 28-29, 2022, in Chandigarh, this meeting was chaired by Union FM Nirmala Sitharaman. Recommendations included rate revisions to boost revenue and correct inverted duty structures, along with a reduction in the GST exemption list. Compliance relief was also extended to e-commerce suppliers and taxpayers under the composition scheme.
• 46th GST Council Meeting (December 29, 2021): This meeting, held on December 31, 2021, in New Delhi and led by Union FM Nirmala Sitharaman, decided to postpone the proposed GST rate increase for textiles to 12%.
• 45th GST Council Meeting (September 1, 2021): On September 17, 2021, the council discussed extending tax concessions for COVID-19 essentials, addressing GST compensation for states, and correcting inverted tax structures, among other agenda items.
• 43rd GST Council Meeting (May 28, 2021): Conducted on May 28, 2021, the council re-introduced the GST amnesty scheme, streamlined late fees for all taxpayers (especially small businesses), and exempted IGST on imported COVID-19 treatment equipment and relief supplies until August 31, 2021.

Major Resolutions from the 25th GST Council Session

The 25th GST Council meeting introduced several significant decisions:

1. Reduction in Late Filing Fees:
   • The late fee for GSTR-1, GSTR-5, GSTR-5A, and GSTR-6 was decreased to Rs. 50 per day.
   • For nil returns submitted under GSTR-1, GSTR-5, and GSTR-5A, the late fee was lowered to Rs. 20 daily.
2. Voluntary Registration Cancellation: Individuals who voluntarily registered for GST could now apply for cancellation before the completion of one year from their registration date.
3. Extension for Migrated Taxpayers: The deadline for migrated taxpayers to cancel their registration (REG-29) was extended until March 31, 2018.
4. e-Way Bill Portal Transition: Following the successful rollout of e-Way bills, the dedicated portal was slated to transition to ewaybillgst.gov.in.
5. e-Way Bill Rule Modifications: Specific amendments to e-Way bill regulations were expected to be announced shortly.
6. Handicraft Committee Recommendations: The council endorsed recommendations from the Handicraft Committee, with specific rates to be determined at a later stage.
7. Rate Reductions Implemented: GST rates were reduced for 29 goods and 53 services, with these changes becoming effective from January 25, 2018.

Adjustments to GST Rates for Goods

The council announced various changes to GST rates for specific goods:

Goods with Nil GST Rate:

• Vibhuti
• Components and accessories essential for manufacturing hearing aids.
• De-oiled rice bran

Rate Reduction from 28% to 18%

• Pre-owned motor vehicles, including medium and large cars and SUVs, provided no Input Tax Credit (ITC) is claimed.
• Public transportation buses powered by biofuel.

Rate Reduction from 28% to 12%

• Pre-owned motor vehicles, excluding medium and large cars and SUVs, provided no ITC is claimed.

Rate Reduction from 18% to 12%

• Sugar-boiled confectionery.
• Drinking water packaged in 20-litre bottles.
• Biodiesel.
• Drip irrigation systems, encompassing laterals and sprinklers.
• Mechanical sprayers.
• Specific listed bio-pesticides (12 varieties).
• Fertilizer-grade phosphoric acid.
• Bamboo wood building joinery.

Rate Reduction from 18% to 5%

• Liquefied Petroleum Gas (LPG) supplied to domestic households.
• Raw materials and consumables required for launch vehicles, satellites, and payloads (applicable for both CGST and IGST).
• Tamarind kernel powder.
• Mehendi paste in cones.

Rate Reduction from 12% to 5%

• Articles crafted from straw, esparto, or other plaiting materials.
• Velvet fabric, on the condition that no refund is sought for ITC.

Rate Reduction from 3% to 0.25%

• Diamonds and precious stones.

GST Rate Increase from 12% to 18%

• Cigarette filter rods.

Rate Increase from 0% to 5%

• Rice bran (excluding de-oiled rice bran).

Compensation Cess Reduced to 0%

Compensation cess was abolished for the following motor vehicles, contingent on no ITC being availed:

• Pre-owned motor vehicles (medium and large cars and SUVs).
• Pre-owned motor vehicles (other than medium and large cars and SUVs).
• Vehicles designated as ambulances, equipped with all necessary accessories.
• Buses with 10-13 seats and ambulances, subject to specific conditions.

Adjustments to GST Rates for Services

The council also introduced new GST applicability and rate changes for various services:

Newly Applicable GST on Services:

• A 5% GST rate was applied to small housekeeping service providers notified under Section 9(5) of the GST Act, who offer services through an E-commerce Operator (ECO) without claiming ITC.
• A 28% GST rate was imposed on actionable claims related to the chance to win in betting and gambling, including horse racing.

Rate Reduction from 28% to 18%

• Services involving admission to theme parks, water parks, joy rides, merry-go-rounds, go-karting, and ballet.

Rate Reduction from 18% to 12%

1. Transportation of petroleum crude and petroleum products with ITC credit.
2. Construction, erection, commissioning, or installation of original works for metro and monorail projects.
3. Works Contract Services (WCS) provided by a sub-contractor to a main contractor, where the main contractor offers WCS to Central Government, State Government, Union Territory, a local authority, a Governmental Authority, or a Government Entity at a 12% rate.
   • Note: Similarly, sub-contract services to the main contractor will attract a 5% GST rate when the main contractor provides services to Central Government, State Government, Union Territory, a local authority, a Governmental Authority, or a Government Entity at a 5% rate.
4. Services provided by Common Effluent Treatment Plants for effluent treatment.
5. Mining or exploration services for petroleum crude and natural gas, as well as drilling services for these goods.

Rate Reduction from 18% to 5%

1. Tailoring services.
2. Transportation of petroleum crude and petroleum products without ITC credit.
3. Job-work services for the manufacturing of leather goods (Chapter 42) and footwear (Chapter 64).

List of Exempted Services and Associated Amendments

The council introduced new exemptions and modified existing limits for various services:

Newly Exempted Services:

• Provision of information under the Right to Information (RTI) Act, 2005.
• Legal services extended to Government, Local Authority, Governmental Authority, and Government Entity.
• Transportation of goods from India to destinations outside India by air or sea, effective until September 30, 2018.
• Life Insurance provided to Coast Guard personnel under the Central Government's Group Insurance Scheme by the Naval Insurance Group Fund, retrospectively from July 1, 2017.
• Dollar-denominated services offered by financial intermediaries in IFSC SEZs to individuals outside India, which are considered external to India under regulations by RBI, IRDAI, SEBI, or other financial regulatory bodies.
• Pure services rendered to a Government entity by a Panchayat or Municipality. Composite supplies predominantly involving services (up to 25% goods supply) are also exempted.
• Leasing of land:
  • By government or local authority to a governmental authority or government entity.
  • Supplied as part of a specific composite supply for flat construction, etc.
• Admission to, or conduct of, examinations for all educational institutions, including entrance examinations with collected fees.
• Reinsurance services for the following insurance schemes:
  • General insurance business under schemes like Pradhan Mantri Suraksha Bima Yojana and others listed in Notification 12/2017-CGST Rate.
  • Life insurance business under schemes such as Pradhan Mantri Jan Dhan Yojana and others listed in Notification 12/2017-CGST Rate.
• Fumigation services within warehouses for agricultural produce.
• Admission services to planetariums where the charged consideration is below Rs. 500.
• Subscription to online educational journals/periodicals by educational institutions offering degrees recognized by law.
• Renting of transport vehicles to entities providing transportation services to educational institutions (for students, faculty, and staff) offering education up to higher secondary or equivalent.
• Services provided by and to F édération Internationale de Football Association (FIFA) and its subsidiaries directly or indirectly related to any FIFA U-20 World Cup events hosted in India.

Changes in Exemption Limits:

• The monthly exemption limit for services provided by Resident Welfare Associations (unincorporated or nonprofit entities) to their members was raised from Rs. 5,000 to Rs. 7,500 per member.
• The exemption limit for the cover amount in life microinsurance products approved by IRDAI was increased from Rs. 50,000 to Rs. 2 lakhs.
• The exemption limit for theatrical performances (Music, Dance, Drama, Orchestra, Folk or Classical Arts, and similar activities in any Indian language) was raised from Rs. 250 to Rs. 500 per person.

Other Significant Council Recommendations

The council put forward additional important recommendations:

• Allowing Input Tax Credit (ITC) for input services within the same business line at a 5% GST rate for tour operator services.
• Extending the Viability Gap Funding (VGF) period for the construction of Regional Connectivity Scheme (RCS) Airports from one to three years from the date of commencement of the RCS Udan Airport.
• Proposing not to include the value of deposits, loans, or advances generating interest or discount in the value of exempt supply under sub-section (2) of section 17 (this does not apply to Banking companies, Financial Institutions, or NBFCs extending such deposits, loans, or advances).
• Deferring GST liability for Transferable Development Rights (TDR) against consideration in the form of construction services, and for construction services against TDR, until the possession or property rights are transferred to the landowner via a conveyance deed or similar instrument (e.g., allotment letter). No deferment applies to the cash component.
• Revisions in Valuation of Lottery, Betting, and Gambling Services:
  • A provision was proposed to set the value of a lottery at 100/112 or 100/128 of the previously notified lottery ticket price.
  • A provision was suggested to determine the value of supply for Betting & Gambling as 100% of the face value of the bet or the amount paid into the totalizator.
• Recommendations regarding Reverse Charge Mechanism (RCM):
  • Including renting of immovable property by government or local authority to a registered person under reverse charge, while renting to unregistered persons remains under forward charge.
  • Defining "insurance agent" in the reverse charge notification to align with its meaning in Section 2(10) of the Insurance Act, 1938, thereby excluding corporate agents from reverse charge provisions.

Issued Clarifications

Clarifications were provided regarding GST rates for specific goods:

1. A GST rate of 18% is to be applied solely to the net quantity of "Poly Butylene Feed Stock & Liquefied Petroleum Gas" retained for the production of "Poly Isobutylene or Propylene or di-butyl para cresol," subject to specified conditions.
2. Regarding the Rail Coach Industry:
   • A 5% GST rate on Chapter 86 Goods (with the condition that no refund of unutilized ITC is permitted).
   • Other goods supplied to Indian Railways will attract GST at their respective applicable rates.
3. Regarding Coal Rejects under HSN Code 2701:
   • A GST rate of 5%.
   • A Compensation Cess of Rs. 400 per metric ton.

Further information on past GST Council meetings can be found in GST News and Announcements.