 "Finance Ministry Press Conference, GST Council, Nirmala Sitharaman, Finance Minister")
Finance Minister Nirmala Sitharaman addresses the press conference after the GST Council meet | Credit: X/@FinMinIndia
The all-powerful GST Council, at its meeting on Monday, took a slew of decisions that include setting up a state panel to examine the future for the compensation cess, to suggest the treatment of cess collections post-repayment of loans, expanding the existing state panel on rate rationalisation to look into the issues pertaining to life and health insurance, and providing relief to foreign airlines.
The Council also decided to review the Integrated GST (IGST) by a panel of secretaries headed by the additional secretary, revenue.
“We have told them that they (GoM on insurance) will look into this matter and come up with a report by the end of October. The GST Council, which will meet in November, will finalise based on this report which will come from the panel,” said Finance Minister Nirmala Sitharaman, while briefing the media after the Council meeting.
On compensation cess, the union minister explained that it extended legally only until March 2026, was initially intended for compensation-related purposes, and used to repay back-to-back loans. If the cess is paid off earlier, collections will cease, as its purpose was strictly for the first five years. Future collections beyond this period will be evaluated by the GoM. Sitharaman indicated that the surplus from the compensation cess could reach approximately Rs 40,000 crore, potentially clearing back-to-back loan payments by early 2026.
Introduced to address states’ revenue shortfalls post-GST implementation, the compensation cess was initially intended to be temporary but has been extended until March 2026.
The Council has addressed some key concerns of the industry by clarifying tax treatment on several goods and services. This includes clarification on imported services and export status for data hosting and advertising brings, a move to bring clarity for global investors and Indian businesses expanding in these sectors.
On exempting foreign airlines, Revenue Secretary Sanjay Malhotra said, “Another important decision was taken to exempt import of services by an establishment of a foreign airlines company,” while apprising the press on key decisions taken in the meet. The Council also recommended regularising the past period on an ‘as is where is’ basis.
The move will provide significant relief to foreign airlines that had received notices from the Directorate General of Goods and Services Tax Intelligence (DGGI). Earlier, DGGI had sent show cause notices to 10 foreign airlines operating in the country, for alleged non-payment of tax amounting to Rs 10,000 crore.
“The exemption of GST on import of services by related parties for airlines is a much-needed relief for the aviation sector. However, the shipping industry continues to face similar challenges, which still need attention,” said Saurabh Agrawal, partner, EY.
Besides, affiliation services provided by educational boards like CBSE were also clarified. It was decided to regularise the past period between July 1, 2017, and June 17, 2021, on an ‘as is where is’ basis, it said. The Council also recommended exempting the supply of research and development services by a government entity/research association, university, college, or other institution. On goods, GST rates on essential items like cancer drugs and everyday goods such as namkeens and savoury items were reduced, while tax on car seats has been increased to 28 per cent in line with two-wheeler seats.
Another notable development is the proposed extension of e-invoicing to the B2C segment and the introduction of mechanisms like the invoice management system (IMS).
“Voluntary introduction of B2C invoicing underscores the Council’s intent to foster both relief, focus on environment-friendly measures, and modernisation in GST compliance, particularly incentivising refunds for foreign tourists. These progressive reforms signal a pivotal shift in India’s indirect tax landscape, balancing revenue generation with economic facilitation,” said Mahesh Jaising, Partner and Leader, Indirect Tax, Deloitte India.
On reviewing GST on online gaming, the Council discussed the rise in online gaming revenues following the imposition of a 28 per cent tax since October 2023. Finance Minister Nirmala Sitharaman announced on September 9, 2024, that revenue from online gaming has jumped by 412 per cent, with collections soaring to Rs 6,909 crore in just six months. Casinos, too, saw a 30 per cent rise in revenue during the same period.
First Published: Sep 09 2024 | 9:55 PM IST
