No tax on financial institution penalties, EV tax hike, popcorn tax readability, and different key highlights, ETCFO

The fifty fifth assembly of the Items and Providers Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, concluded on December 21, 2024, in Jaisalmer, Rajasthan, unveiling important reforms aimed toward simplifying the tax construction and addressing essential points throughout a number of sectors. From modifications affecting electrical automobiles (EVs) to readability on popcorn taxation, the choices made have far-reaching implications. With extra discussions anticipated on key points like medical insurance and meals supply platforms, the upcoming conferences promise additional readability and potential modifications to the GST framework, opined trade specialists.

Right here Are the High Highlights from the fifty fifth GST Council Assembly:Readability on Penal Costs: No GST on Financial institution Penalties

In a call that brings much-needed readability to the monetary sector, the GST Council determined that no Items and Providers Tax (GST) will apply to penal prices levied by banks or monetary establishments on debtors. This transfer follows amendments to RBI laws prohibiting the levy of penal curiosity, with lenders now now not required to gather GST on these prices.

Gyanendra Tripathi, Associate & Chief (West) at BDO India, welcomed the choice, noting it will present important reduction to banks and monetary establishments that had beforehand been unclear in regards to the tax implications of such penalties. “It is a important step in providing readability to the monetary sector,” Tripathi mentioned.

GST on Electrical Automobiles Raised to 18% for Used EVs

In a transfer that has sparked debate, the Council really useful rising the GST on used electrical automobiles (EVs) from 12% to 18%. This modification aligns used EVs with the tax charge relevant to new petrol and diesel vehicles, which has raised considerations about affordability within the second-hand EV market.

Sivakumar Ramjee, Government Director at Nangia Andersen India, famous that whereas this adjustment standardizes taxation, it would make used EVs much less interesting. “Used EVs will seemingly see larger prices, which might have an effect on the expansion of this section,” he acknowledged.

Popcorn Tax Confusion Cleared

The GST Council additionally addressed confusion surrounding the taxation of popcorn. It clarified the next tax remedy:

Pre-packaged and labelled ready-to-eat popcorn will entice 12% GST.

Caramelized popcorn will face an 18% GST.

Unpackaged salted or spiced popcorn will stay at 5% GST.

This determination goals to simplify the earlier confusion over the various taxation of various kinds of popcorn. Nonetheless, Shravan Shetty, Managing Director at Primus Companions, identified that the staggered tax charges for comparable merchandise may complicate compliance. “Having totally different charges for variations of the identical product will increase each the price of compliance and complexity in reporting. A simplified charge construction can be way more environment friendly,” he remarked.

Gene Remedy Exempted from GST

In a landmark determination, the GST Council exempted gene remedy from GST, making life-saving remedies extra reasonably priced. This determination is anticipated to profit many sufferers who beforehand struggled with the excessive prices related to such therapies. Gyanendra Tripathi described this exemption as “a commendable step that may assist make important healthcare remedies extra accessible to these in want.”

GST Charge Discount on Fortified Rice and ACC Blocks

The GST charge on fortified rice kernels was lowered from 18% to five%, a call that may seemingly profit public dietary packages. Moreover, autoclaved aerated concrete (ACC) blocks containing greater than 50% fly ash will now entice 12% GST, down from 18%. These modifications are a part of the Council’s ongoing efforts to ease the monetary burden on sure industries and sectors.

Used Automobiles and Luxurious Automobiles

The GST on used vehicles was raised from 12% to 18%, aligning with the tax charges on new vehicles. Whereas this improve brings used automobiles nearer to new automobile tax charges, it might have combined results available on the market, particularly for luxurious vehicles. Shravan Shetty commented that regardless of the rise, the 18% GST continues to be aggressive for used luxurious vehicles, the place depreciation performs a big function in decreasing their market value. “This charge ought to nonetheless make used vehicles engaging to patrons, particularly within the luxurious section the place depreciation is excessive,” he noticed.

State-Particular Cess and Simplification in GST Registration

The Council additionally mentioned the introduction of a Group of Ministers (GoM) tasked with streamlining the method for levying state-specific cess within the occasion of disasters. Gyanendra Tripathi warned that such state-specific levies might distort the uniformity of the GST construction and urged the GoM to discover various revenue-raising mechanisms for pure disasters.

One other important determination was the push to simplify the GST registration course of, notably for small companies. This could standardize documentation necessities and scale back regional discrepancies, a welcome step for smaller companies.

Different Key Choices

The Lengthy Vary Floor-to-Air Missile (LR-SAM) system shall be exempt from GST.

Reward vouchers will now not be handled as items or providers beneath GST guidelines, resolving confusion that had emerged from conflicting rulings previously.

The Council additionally mentioned charge rationalization for 148 objects, however a call on this shall be deferred to a future assembly.

Deferred Choices

A number of essential points had been deferred for additional evaluate, together with the proposed discount of GST on well being and life insurance coverage premiums. A choice on meals supply platforms like Swiggy and Zomato, which was anticipated to deliver down GST from 18% to five%, was additionally postponed.

Shravan Shetty commented on the delay within the determination on medical insurance, saying, “The delay suggests a scarcity of consensus, particularly with the insurance coverage sector contributing ₹16,000 crores in 2023-24. A extra considerate dialogue is required to steadiness sectoral wants with tax implications.”