JAISALMER: Even though the GST Council in its 55th meeting in Jaisalmer avoided ‘thorny’ issues such as lowering GST rates on insurance premiums and a discussion on rate rationalisation, it did make several changes in the rates of goods and services.
Among the major changes announced, the Council decided to increase the GST rate from 12% to 18 % on the sale of all old and used vehicles, including EVs.
Currently, 18% GST is levied on sale of old and used petrol vehicles of engine capacity of 1200 cc or more & of length of 4000 mm or more; diesel vehicles of engine capacity of 1500 cc or more of a length of 4000 mm and SUVs.
However, Finance Minister Nirmala Sitharaman clarified the 18% GST would only be levied only on the margin – the difference between the purchase price and selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle. The FM also clarified that the GST is not applicable in case of unregistered persons.
The tax rate on caramelised popcorn – that took social media by a storm on Saturday – has been increased from 5% to 18%. Surprised by the social media outrage over the increased rate of caramelised popcorn, the finance minister explained that ready-to-eat popcorn, which is mixed with salt and spices classified as Namkeen, and therefore, attracts 5% GST if supplied as other than pre-packaged and labelled and 12% GST if supplied as pre-packaged and labelled. However, when popcorn is mixed with sugar thereby changing its character to sugar confectionery, it would attract an 18% GST. Sitharaman said that the clarification was required, or else the matter would lead to unnecessary legal disputes.
Among other changes in rates, the council has extended the concessional 5% GST rate on food inputs that are supplied for food preparations intended for free distribution to economically weaker sections under a government program subject to the existing conditions.
It has also exempted gene therapy from GST, reduced the rate on Fortified Rice Kernel (FRK) to 5%, and cut the rate of Compensation Cess to 0.1% on supplies to merchant exporters at par with GST rate on such supplies.
The Council also clarified that no GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.
The GST Council also gave an important clarification with regards to taxation of vouchers. It clarified that transactions in vouchers shall be treated neither as a supply of goods nor as a supply of services and that distribution of vouchers on principal-to-principal basis shall not be subject to GST.
However, where vouchers are distributed on principal-to-agent basis, the commission/fee or any other amount charged by the agent for such distribution is taxable under GST.
No decision on tax on food delivery
On the issue of GST on food delivery services by e-commerce platforms, the finance minister clarified that the GoM has been still discussing whether GST on delivery charges be the same as the GST on food from restaurants or should it be higher.
“The issue has not reached the GST Council,” the minister reiterated.
On bringing ATFs under the GST purview, the finance minister said that states have categorically said no to inclusion of aviation turbine fuel as they feel ATFs come in the petroleum product basket.
A decision on the issue of whether charges collected by municipalities for granting FSI including additional FSI, chargeable to GST on reverse charge basis has been deferred by the Council for further examination on the behest of the Central Government on the ground that this amount relates to Municipalities or local authority.
Meanwhile, the decision-making body of the GST has given its nod to insert an enabling provision in CGST Act, 2017 so as to empower the Government to enforce the Track and Trace Mechanism for specified evasion prone commodities. The system shall be based on a Unique Identification Marking which shall be affixed on the said goods or the packages thereof. This will provide a legal framework for developing such a system and will help in implementation of mechanism for tracing specified commodities throughout the supply chain.