GST 2.0: Re-labelling of drugs, medical devices not mandatory for stocks issued before Sept 22

The Ministry also said insurance companies will not be able to claim input tax credit on GST paid on inputs like commissions and brokerages for individual health and life insurance policies with effect from September 22. “At present, insurers are availing ITC on many inputs and input services such as commissions, brokerage and reinsurance, etc. Out of these input services, reinsurance services will be exempted,” the Ministry said. The input tax credit (ITC) — tax paid on inputs adjusted against the GST liability on output — of other inputs or input services such as commissions, brokerages will be reversed because the output services will be exempted, it said.

Reinsurance services act like insurance for insurance companies as a way for insurers to transfer part of their risk to another company with an aim to protect against any potential losses.

The GST Council in its 56th meeting held on September 3 had decided to exempt premium paid on individual health and life insurance policies from GST effective September 22, from the current 18 per cent rate.

For other services such as beauty and physical well-being services, the Ministry said the GST rate of 5 per cent without ITC is mandatory. “Service providers do not have the option to charge 18 per cent with ITC on these services,” it said.

For the hospitality services, the Ministry clarified that the hotels supplying units of accommodation which have value less than or equal to Rs 7,500 per unit per day will not be able to avail ITC on such units as the GST rate for such supplies is 5 per cent without ITC. “It is a mandatory rate prescribed for such services, and the option to pay GST at the rate of 18 per cent with ITC is not available for such units,” it said.

Local delivery services will be taxable at 18 per cent GST, with the liability to pay directly on the person supplying the service if the person is registered and on the ECO (electronic commerce operator) if the person supplying the services is not liable to be registered. Delivery services through e-commerce operators such as Zomato, Swiggy and quick commerce companies like Blinkit, Zepto are set to face a 18 per cent GST on delivery charges beginning September 22. In the past, such platforms have maintained that they only collect delivery fees on behalf of delivery workers and it is not part of their revenue, and so, they should not be expected to pay GST on the service, which is fulfilled by a delivery worker, who is an independent vendor.

Tax experts said the FAQs by the government will help smoothen the transition with minimum disruption or future litigations. “The FAQs address recurring problem areas such as how revision in MRP should be made for existing stock of medicines, how ITC must be handled where exemptions or concessional rates apply, and have clarified a few other points,” Rahul Shekhar, Partner- Indirect Tax, Nangia Andersen LLP said.

For hotels, beauty and physical well-being services, Shekhar said they cannot choose a higher rate with ITC on these services. “The government wants that the end customer gets the maximum benefits out of these changes, therefore, has not allowed dual-rate structure for these industries,” he said.