The 54th GST Council meeting, set for September 9, 2024, will be a pivotal event as it aims to address several pressing issues that have been under scrutiny for some time. This meeting follows a series of preparatory discussions focused on critical topics such as tax rates on hybrid vehicles, the GST treatment of life insurance premiums, and challenges within the textiles and pharmaceutical sectors.
The GST Council’s agenda for this session is notably comprehensive. According to Ranjeet Mahtani, Partner at Dhruva Advisors, the council will consider a range of significant issues. “The unofficial agenda includes evaluating potential rate reductions for hybrid vehicles, assessing GST implications on life insurance premiums, and addressing the inverted duty structure affecting the textiles and pharmaceuticals sectors. The council will also deliberate on the status of the compensation cess and provide clarity on GST for transactions involving foreign branch offices, including those related to airlines, shipping lines, and IT giants. Moreover, a review of the taxation regime introduced in October 2023 for online gaming is overdue,” Mahtani explained.
One of the key recommendations under consideration is the proposed tax relief for foreign airlines. This recommendation aims to exempt foreign airlines from paying GST on certain services imported from their overseas Indian branches or related entities, provided that no monetary transaction is involved. This proposed relief is expected to offer substantial benefits to foreign airlines that have been grappling with tax notices issued by the Directorate General of GST Intelligence (DGGI).
Despite these advancements, some issues remain unresolved. One major point of contention is the GST on health insurance premiums. There has been significant debate over whether to impose GST on these premiums, with various political leaders, including Union Minister Nitin Gadkari and West Bengal Chief Minister Mamata Banerjee, urging Finance Minister Nirmala Sitharaman to reconsider or roll back the GST on health insurance premiums. However, a consensus on this matter has yet to be achieved.
Additionally, the taxation of online gaming remains a complex issue. The GST Council had previously postponed making a final decision regarding the tax liabilities of online gaming companies. Reports indicate that while further delays have been recommended, the matter will likely be revisited in this meeting. Online gaming companies have raised concerns with the Ministry of Finance about their escalating tax liabilities, which have reached Rs 1.5 lakh crore. Some casino operators have reported tax liabilities that are significantly higher than their annual revenues.
Another topic expected to see limited progress is the overall rate rationalization. Although rate rationalization is a crucial issue, it was deferred from the 53rd GST Council meeting and may not be addressed in the upcoming session. Similarly, clarifications on the tax position for redevelopment projects and development rights are anticipated to be postponed.
As the GST Council gears up for this important meeting, stakeholders from various sectors will be closely monitoring the outcomes. The decisions made during this session will likely have significant implications for businesses, consumers, and the overall economic landscape.
