GST Council Expected to Address Inverted Duty Structure (IDS) and Introduce Taxpayer-Friendly Measures
By: Admin | August 21, 2024 | Categories: GST Recent News | 4 Min Read
GST Council Meeting Scheduled for September 9, 2024
The 54th GST Council Meeting will occur on September 9, 2024, in New Delhi. This meeting follows the June 23 session, where Union Finance Minister Nirmala Sitharaman emphasized the need for rate rationalization.
Focus on Rate Rationalization
Experts anticipate significant changes to the GST rate structure this financial year. The current four-tier system includes rates of 5%, 12%, 18%, and 28%. The fitment committee is reviewing over 1,200 goods and services to consider a simplified three-slab system. This change aims to streamline GST while balancing revenue needs and consumer affordability.
Industries benefiting from lower tax rates, such as agriculture, food manufacturing, clothing, and healthcare, may resist increases. The inverted duty structure also creates challenges for sectors like textiles, fertilizers, and electric vehicles (EVs). For example, the pharmaceutical industry struggles with an 18% GST on inputs, while the final product is taxed at 5%, leading to financial difficulties.
Addressing Inverted Duty Structure (IDS)
The GST Council will likely address the issue of accumulated input tax credit (ITC) due to the inverted duty structure. This problem affects working capital, especially in sectors like footwear, fertilizers, textiles, and EVs. The Council may also consider challenges faced by the real estate and airline industries.
Taxpayer-Friendly Measures
The 53rd GST Council meeting recommended waivers on interest and penalties for demand notices under Section 73 of the CGST Act for small businesses. Businesses can receive these waivers if they pay the full tax by March 31, 2025. The business community welcomed this decision.
However, recent increases in notices from the Directorate General of GST Intelligence (DGGI) to companies such as Infosys and foreign airlines have raised concerns. Multinational corporations (MNCs) are closely watching the upcoming meeting, hoping for discussions on valuation and taxability related to reimbursements for foreign branches.
Sector-Specific Considerations
The Parliamentary Standing Committee on Finance proposed reducing GST on health insurance, especially for senior citizens. Finance Minister Nirmala Sitharaman stated that the GST Council will make the final decision. It remains unclear whether this proposal, supported by Road Transport and Highways Minister Nitin Gadkari, will be prioritized.
Insurance Sector Concerns
The insurance sector seeks clarity on zero-rating benefits for insurance provided to SEZ employees. Meanwhile, the debate about including Aviation Turbine Fuel (ATF) under GST continues. ATF is currently subject to VAT, which prevents airlines from claiming input tax credit benefits.
Online Gaming Taxation
Although the last Council meeting hinted at taxing online gaming, it seems unlikely that this issue will be addressed in the upcoming session.
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