55th GST Council Meeting: Key Decisions on Tax Rates, Insurance Premiums, and Electric Vehicles

No Major Breakthroughs on Rate Rationalisation; Decisions Deferred on Aviation Fuel and Floor Space Index Taxation

Jaisalmer (Rajasthan), December 22: The 55th Goods and Services Tax (GST) Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, concluded with incremental decisions on select issues, while several major topics, including rate rationalisation and Aviation Turbine Fuel (ATF) taxation, were deferred for further review.

Key Highlights from the Meeting:

1. Relief for Merchant Exporters:
   • The compensation cess rate on supplies to merchant exporters has been reduced to 0.1%, aligning it with the GST rate on such supplies.
2. Fortified Rice and Agricultural Goods:
   • Fortified rice kernels will now attract a 5% GST rate.
   • Black pepper and raisins directly supplied by farmers will remain exempt from GST.
3. Tax on Construction Materials:
   • AAC blocks containing 50% fly ash will attract a 12% GST rate.
4. Exemption for Payment Aggregators:
   • Payment aggregators handling transactions below ₹2,000 will be eligible for GST exemption.
   • However, this exemption does not extend to payment gateways or fintech companies.
5. Penal Charges on Loan Defaults:
   • No GST will be imposed on penal charges levied by banks and NBFCs on borrowers for non-compliance with loan terms.
6. Electric Vehicles (EVs):
   • New EVs will continue to be taxed at 5%.
   • Used EVs sold between individuals will not attract GST.
   • If a company modifies and resells an EV, it will attract an 18% GST on the margin value (difference between purchase and resale price).
7. Quick Commerce and Popcorn Taxation:
   • No conclusive decision was reached on GST for quick commerce services, e-commerce, and food delivery platforms.
   • Salted popcorn will be taxed at 5%, while popcorn with added sugar will fall under a separate taxation category.

Deferred Decisions and Ongoing Reviews:

• Aviation Turbine Fuel (ATF): States raised concerns, and no changes were made to its taxation. Additionally, no Group of Ministers (GoM) will be formed on this issue.
• Insurance Premium Tax Rates: The GoM has been given more time for deliberations on reducing GST rates for health insurance premiums.
• Floor Space Index (FSI): Taxation-related decisions remain under consideration.
• Disaster Management Cess: The GoM will review proposals related to implementing a disaster management cess.

Focus on Broader Discussions and Future Reviews

While some progress was made on sector-specific GST clarifications, several critical matters have been deferred for deeper analysis and consultation.

Finance Minister Nirmala Sitharaman emphasized the need for thorough deliberations on complex issues, particularly concerning insurance premiums, disaster funding, and emerging sectors like quick commerce.

The GST Council’s decisions aim to balance revenue generation with economic stability, ensuring clarity and fairness across diverse industries.