What can we expect from the 54th GST meeting on September 9? Insurance premiums, online gaming

Experts said that the 54th GST Council meeting is expected to discuss and make announcements on rate rationalisation, reduction in tax slabs, removing inverted duty structure, besides lowering the rates for online gaming, insurance and other sectors.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, is all set to meet on September 9, 2024. Image: Reuters

54th GST Council Meeting: With the GST Council, chaired by Finance Minister Nirmala Sitharaman, all set to meet on September 9, 2024, experts said that the 54th meeting is expected to discuss and make announcements on rate rationalisation, reduction in tax slabs, removing inverted duty structure, besides lowering the rates for online gaming, insurance and other sectors. Saurabh Agarwal, Tax Partner, EY, said, “The upcoming GST Council meeting on September 9, 2024, is expected to focus on several key areas. Rate rationalization and a reduction in tax slabs for items like hybrid vehicles, gaming, and consumer durables may be discussed. The Council may also address the inverted duty structure affecting products such as paper, furniture, washing machines, solar glass, and air purifiers. The cessation of the compensation cess, introduced to support states during the GST transition, could be another topic on the agenda. Furthermore, the GST implications on transactions between foreign branch offices of Indian companies, particularly for foreign airline and shipping lines, are expected to be discussed.”

Gunjan Prabhakaran, Partner & Leader – Indirect Tax, BDO India, said, “While the Government had mentioned about a review of the rate structure on gaming after a period of six months, it was not taken up in the last meeting and can be discussed in the current meeting as a part of overall discussion on GST rates. In addition, there is a growing demand for exemption/reduction of GST rate on health and life insurance from all quarters and the GST Council is likely to consider it in the upcoming meeting.

One of the most pressing issues expected to be discussed during the meeting is related to online gaming. The gaming companies argue that the rates are excessively high and potentially detrimental to the sector’s growth. Earlier, online gaming companies were charging GST at 18 per cent on platform fees, but later in its 50th meeting, the GST Council decided to levy a 28 per cent GST rate on actionable claims in casinos, horse racing, and online gaming during a meeting on July 11, 2023. And despite some states requesting a reconsideration in the 51st GST Council meeting, the Council upheld its initial decision. 

Amandeep Singh Oberoi, Director – Indirect Tax, SW India, said, “Despite efforts by the industry to advocate for a reduction, the GST Council has shown no signs of lowering the rates for online gaming. While user behavior has not significantly changed in response to this tax, the high rate has contributed to a noticeable slowdown in the industry’s growth, according to an industry insider.”

Shashi Mathews, Partner, INDUSLAW, also said that the Council is expected to take up the issue of rate cut from 28 per cent for online money gaming. “While a rate cut immediately may not happen as it would require deliberations, one may hope for some direction from the Council, in this regard,” he added. 

However, Shivam Mehta, Partner, Lakshmikumaran and Sridharan Attorneys, maintained that for those anticipating developments in the online gaming front, “the meeting may not be prove to be pathbreaking given that the matter is sub judice before the Supreme Court and may likely create its own path in the highest court of the land”. Reiterating the same, Siddharth Surana, Director, RSM India, said, “It seems unlikely that this issue will be resolved at the upcoming Council Meeting. It is expected that further industry representation and legal discourse would be necessary to address the concerns of stakeholders in this sector.”

Changes in rates in insurance services

Hospital room rents charged above Rs 5000 have been brought into the GST net with effect from July 2022. Sanjay Chhabria, IDT lead, Nexdigm, said, “The primary expectation that would be focused on is the long-pending demand for reducing or abolishing GST on health and life insurance. Given the absence of any announcement on this matter during the Union Budget and the sustained pressure from various quarters, this could be undertaken.”

Amandeep Singh Oberoi from SW India, said, “Middle-class individuals often hesitate to purchase insurance, and existing policyholders may even opt out. A reduction or elimination of the GST rate could mark the beginning of a new era, helping to make insurance more accessible and aligning with IRDAI’s vision of “Insurance for All” by 2047. These critical issues are expected to be discussed at the upcoming GST Council meeting, especially as several ministers have expressed concerns over the current situation.”

Shashi Mathews, Partner, INDUSLAW, said, “Considering the recent deliberations in the parliament on the levy of GST on health and life insurance, and the representation made by several organizations including one by Nitin Gadkari, it may be expected that the Council will also consider and review the levy of GST on such insurances, and may provide relief to some extent.”

Rate rationalization and reduction of tax slabs

Experts opined that discussions around the reduction of the current four major GST slabs (5 per cent, 12 per cent, 18 per cent, and 28 per cent) to possibly three slabs have been ongoing for a while now and such a  move could simplify tax structure and reduce compliance burdens, but may also have inflationary pressures. “Businesses are keenly watching for any developments in this area, as a streamlined rate structure could have significant implications for pricing and profitability. We expect that as rate setting is a complex exercise and would require examination of macro-economic and specific industry considerations, it is unlikely that this issue will get addressed in the Council Meetings, but we may hear some announcements regarding the progress on this proposal,” said Siddharth Surana, Director, RSM India.

The GST Rate Rationalization Committee (RRC) was reconstituted in June 2024, after the elections. Sanjay Chhabria, IDT lead at Nexdigm, said, “Given the little gap between the RRC reconstitution, earlier council meet (June 2024) and the current meet, it seems unlikely that any discussion will be made on this front. However, given that RRC may take a little while to come up with the updated rates, their findings and timeline may be discussed. Apart from above, technical and legal changes for easing the compliance burden on the tax payment may be taken up.”

Harsh Bhuta, Partner, Bhuta Shah and Co LLP., said, “The entire industry anticipates that the meeting will kick-start discussions and make progress on the much-needed topics of rate rationalization and the reduction of tax slabs. Additionally, it is expected that, along with rate rationalization, the inverted duty structure affecting industries like textiles, fertilizers, pharmaceuticals, and EVs may be addressed.”

GST on transactions between foreign branch offices

There has been a surge in GST notices issued to foreign airlines and IT firms like Infosys, regarding GST on import of services between foreign branch offices and according to experts, there is hope that the government will provide relief or clarification on this issue to prevent further disputes and ease the burden on affected businesses. Sanjay Chhabria from Nexdigm, said, “Recently it came to light that GST authorities had issued some huge GST demands to big IT industry players as well as foreign airlines operating in the country. Such notices triggered severe backlash from the industry. A mechanism to avoid such scenarios, as well as the issues undertaken in the above notices may be discussed, special emphasis could be on the GST levy on the transactions with branch offices.”

Harsh Bhuta from Bhuta Shah and Co LLP., said, “To enhance ease of doing business, clarity is expected from the Council regarding cross-border transactions involving Indian companies and their foreign branches, and vice-versa. This is anticipated to ease concerns across the IT, airline, and shipping industries, which have been unsettled by show-cause notices demanding GST on such transactions.”

Shivam Mehta from Lakshmikumaran and Sridharan Attorneys, said, “Foremost among the issues that the Council is expected to take up, relates to the recent spate of notices issued by DGGI. Of late, the authority has been sending out notices alleging non-payment of GST on services rendered by foreign branches of Indian multinationals on one hand and by Indian branches of foreign multinationals to their foreign counterparts, on the other. The Council is expected to examine these intra-group transactions and issue a suitable clarification.”

Other expectations

Other major expectations from the GST Council meeting include discussions on establishing a standard or stable tax environment for emerging sectors. Additionally, the real estate sector is hopeful that the meeting will provide clarity and address pressing issues, including the taxability of redevelopment projects, the levy of GST on the transfer of development rights in the case of joint development agreements (JDA), an appropriate model for taxing such transfers, and the taxability of government-leased properties for more than 30 years. Further, experts feel there may be discussions on the potential inclusion of petrol and diesel within the scope of GST regulations, and clarity on issues faced by industries such as online gaming and e-commerce. Shravan Shetty, Managing Director at Primus Partners, said, “The 54th GST Council meeting is expected to provide clarity on key areas like rate rationalization, GST on petrol and diesel basis the panel report. We expect also reduction in rates for certain sectors, for example online gaming. Further action on addressing any existing inverted duty structure may also be considered. If actions are taken on these the 54th GST Council might be a historic meeting  paving way for a new simplified indirect tax regime.”

Source:-  Financial Express