53rd GST Council Meet: Key Decisions and Implications for Businesses and Consumers

The 53rd Goods and Services Tax (GST) Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, concluded on June 22, 2024, in New Delhi. This significant gathering of state finance ministers and central government officials resulted in several crucial decisions aimed at simplifying the GST framework, reducing litigation, and easing the compliance burden on taxpayers. In this detailed  article, we’ll explore the major outcomes of the meeting and their potential impact on businesses and consumers across India.

Also Read-What is GST And Why Was It Introduced in India?

Highlights of the 53rd GST Council Meeting.

1. Biometric Aadhaar Authentication for GST Registration.

One of the most notable announcements from the meeting was the nationwide rollout of biometric-based Aadhaar authentication for GST registration. Finance Minister Sitharaman emphasized that this measure would help combat fraudulent input tax credit claims made through fake invoices. This decision is expected to significantly reduce instances of tax evasion and strengthen the overall integrity of the GST system.

2. Changes in GST Rates on Goods and Services.

The Council recommended several changes to GST rates on various goods and services:

Uniform GST Rates:

• A uniform 12% GST rate will be applied to all milk cans, regardless of the material used (steel, iron, or aluminum).
• All types of carton boxes and cases, whether made of corrugated or non-corrugated paper or paperboard, will now attract a 12% GST rate, reduced from the previous 18%.
• Solar cookers, both single and dual energy source models, will be subject to a uniform 12% GST rate.

Exemptions and Reductions:

• Services provided by Indian Railways to the general public, including the sale of platform tickets and battery-operated car services, will be exempted from GST.
• Hostel accommodation services outside educational institutions, up to Rs 20,000 per person per month, will be exempt from GST, provided the stay is for a minimum continuous period of 90 days.

3. Measures to Reduce Litigation and Ease Compliance.

The Council introduced several measures aimed at reducing litigation and simplifying compliance for taxpayers:

Waiver of Interest and Penalties:

Interest and penalties will be waived for demand notices issued under Section 73 of the CGST Act for fiscal years 2017-18, 2018-19, and 2019-20, provided the full tax demanded is paid by March 31, 2025.

Monetary Limits for Appeals:

To reduce government litigation, the Council recommended monetary limits for filing appeals by tax authorities:

• Rs 20 lakh for appeals before the GST Appellate Tribunal
• Rs 1 crore for appeals before High Courts
• Rs 2 crore for appeals before the Supreme Court

Extension of Deadlines:

The deadline for filing GSTR-4 returns for composition taxpayers has been extended from April 30 to June 30, starting from the financial year 2024-25.

4. Trade Facilitation Measures.

Several decisions were made to facilitate trade and ease the burden on businesses:

Reduction in Tax Collected at Source (TCS) Rate:

The TCS rate for supplies through Electronic Commerce Operators (ECOs) has been reduced from 1% to 0.5%.

Clarifications on Insurance Services:

Co-insurance premiums and re-insurance commission transactions between insurers will be treated as “no supply,” regularizing past practices and providing clarity to the insurance sector.

Exclusion of Extra Neutral Alcohol (ENA):

ENA used for manufacturing alcoholic liquor for human consumption will be excluded from GST, addressing a long-standing industry concern.

Implications for Businesses and Consumers.

The decisions made at the 53rd GST Council meeting are expected to have far-reaching implications for both businesses and consumers across India:

1. Enhanced Tax Compliance and Reduced Fraud.

The introduction of biometric Aadhaar authentication for GST registration is a significant step towards curbing tax evasion and fake invoicing. This measure is likely to create a more level playing field for honest taxpayers and improve overall tax collection efficiency.

2. Simplified Taxation for Specific Industries.

The uniform GST rates on milk cans, carton boxes, and solar cookers will simplify taxation for manufacturers and retailers in these sectors. This standardization is expected to reduce compliance complexities and potentially lead to more competitive pricing for consumers.

3. Relief for the Railway Sector and Passengers.

The exemption of GST on various railway services, including platform tickets, is a welcome move for both the Indian Railways and passengers. This decision may lead to marginally reduced costs for train travel and associated services.

4. Support for Education and Accommodation Services.

The GST exemption on hostel accommodation services outside educational institutions will benefit students and working professionals, potentially making such accommodations more affordable and accessible.

5. Reduced Litigation and Compliance Burden.

The waiver of interest and penalties on certain tax demands, along with the introduction of monetary limits for filing appeals, is expected to significantly reduce litigation between taxpayers and tax authorities. This, in turn, should lead to a more efficient use of resources and potentially faster resolution of tax disputes.

6. Clarity for the Insurance Sector.

The clarification on co-insurance premiums and re-insurance commission transactions will provide much-needed clarity to the insurance industry, potentially leading to more streamlined operations and reduced compliance costs.

Expert Opinions and Industry Reactions.

Tax experts and industry leaders have largely welcomed the decisions made at the 53rd GST Council meeting. Abhishek Jain, Indirect Tax Head & Partner at KPMG, praised the move to waive interest and penalties on certain tax demands, stating that it “would go a long way in curtailing unwarranted litigations under GST”.

The reduction in pre-deposit amounts for filing appeals and the extension of Input Tax Credit (ITC) deadlines have also been well-received by the business community. These measures are expected to ease cash flow pressures on taxpayers and provide more flexibility in managing tax-related matters.

Future Outlook and Pending Issues.

While the 53rd GST Council meeting addressed several key issues, some matters remain under consideration:

1. Inclusion of Petroleum Products under GST.

Finance Minister Sitharaman reiterated the central government’s intention to bring petrol and diesel under the GST regime. However, she emphasized that this decision ultimately depends on the states coming together and agreeing on the applicable tax rate. This remains a contentious issue and will likely be a topic of discussion in future GST Council meetings.

2. Rate Rationalization.

The Council has appointed Bihar’s Deputy Chief Minister, Samrat Choudhary, as the Chairman of the Group of Ministers (GoM) on Rate Rationalization. He is expected to submit a status report on the work done for rate rationalization in the next meeting, likely to be held in mid-August. This ongoing process aims to simplify the GST rate structure and address anomalies in the current system.

3. Continued Focus on Ease of Doing Business.

The decisions made at this meeting reflect a continued effort to improve the ease of doing business in India. Future meetings are likely to build on this momentum, with a focus on further simplifying compliance procedures and addressing industry-specific concerns.

Summary.

The 53rd GST Council meeting has resulted in several significant decisions that aim to streamline the GST framework, reduce litigation, and ease the compliance burden on taxpayers. From the introduction of biometric authentication for GST registration to the rationalization of tax rates on various goods and services, these measures are expected to have a positive impact on businesses and consumers alike.

As India continues to refine its GST system, the outcomes of this meeting demonstrate the government’s commitment to addressing stakeholder concerns and improving the overall efficiency of the tax regime. With future meetings on the horizon, including the anticipated discussion on rate rationalization, the GST landscape in India is likely to see further evolution in the coming months.

Businesses and taxpayers are advised to stay informed about these changes and seek professional advice to ensure compliance with the latest GST regulations. As the system continues to mature, it is expected to play an increasingly crucial role in India’s economic growth and development.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.