The 55th Goods and Services Tax (GST) Council meeting, led by Finance Minister Nirmala Sitharaman, unveiled several key decisions aimed at streamlining the tax structure across various sectors.
Among the notable outcomes, the Council exempted GST on penal charges levied by banks and financial institutions on borrowers. This decision, along with several other changes, is expected to bring about ease of doing business and enhance sectoral growth.
One of the primary outcomes of the meeting was the reduction in the rate of GST on fortified rice kernels, which was slashed to 5%. This reduction is expected to provide relief to the food processing sector and promote the use of fortified rice in the country.
Additionally, gene therapy has been exempted from GST, a move that aims to foster growth in the biotechnology and healthcare industries, making these critical treatments more affordable.
Another key development was the recommendation to amend the definition of pre-packaged and labelled items. This change is aimed at bringing more clarity to the classification of goods and ensuring that GST is levied appropriately.
Furthermore, the Council deferred its decision on the issue of taxing health insurance premiums, with further deliberations needed on whether premiums paid by senior citizens or for policies up to ₹5 lakh should be exempted or taxed at a reduced rate.
One of the most anticipated decisions was the clarification on GST for electric vehicles (EVs). The GST Council decided to impose a 5% tax on new EVs, while used EVs, when sold or modified for resale, would be taxed at 18%.
However, no GST will be levied when an EV is transacted between individuals. This decision is seen as a step towards promoting the adoption of electric vehicles in the country and aligning the tax structure with the government’s green mobility goals.
In a move that aims to bring clarity to the popcorn industry, the GST Council also announced the tax treatment for popcorn. Pre-packed and labelled ready-to-eat popcorn will now attract a 12% GST, while caramelised popcorn, typically coated with sugar, will be taxed at 18%, in line with its classification as a sugar confectionery.
This clarification ensures that the existing tax rates remain unchanged, while also providing clarity for both producers and consumers.
The Finance Minister also highlighted that the decision to reduce GST rates for food delivery platforms such as Swiggy and Zomato had been deferred. The proposal to lower the tax rate from 18% (with input tax credit) to 5% (without input tax credit) will be revisited at a later date.
This issue has sparked considerable debate, as food delivery platforms have grown exponentially in recent years and are an integral part of the modern consumer experience.
Further discussions during the GST Council meeting addressed the tax treatment of various other goods. For instance, ACC blocks containing more than 50% fly ash will now attract 12% GST, providing a more uniform tax structure for construction materials.
Additionally, black pepper, whether fresh or dried, and raisins supplied by agriculturists, will not be subject to GST, recognising the need to support the agricultural sector.
One of the major decisions was related to defence and missile systems. The Council granted an exemption for Long Range Surface to Air Missile (LR-SAM) systems, recognising their strategic importance.
This is part of the broader effort to streamline taxes on defence and aerospace components, which are crucial for national security.
The GST Council also announced a reduction in the rate of compensation cess to 0.1% for supplies to merchant exporters, bringing it in line with the GST rate on such supplies. This reduction aims to ease the tax burden on exporters and make Indian goods more competitive in the international market.
Finally, the Finance Minister addressed the issue of aviation turbine fuel (ATF), noting that states were not in favour of bringing ATF under the GST regime.
While there was no consensus on this issue, it was made clear that ATF will remain outside the scope of GST for the time being, continuing to be taxed at the state level as part of the petroleum product basket.
The outcomes of this meeting reflect the GST Council’s ongoing efforts to simplify and streamline India’s indirect tax system. While some decisions, such as the GST on EVs and health insurance, have been eagerly awaited, others, like the tax on food delivery platforms and ATF, will require further discussions.
As the government continues to navigate these complex issues, the aim is clear: to make India’s tax system more transparent, equitable, and conducive to economic growth.
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