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The goods and services Tax (GST) Council in its 55th meeting held in Jaisalmer Saturday deferred a decision to lower the tax rate on health and life insurance premiums, and food delivery charges of e-commerce aggregators such as Swiggy and Zomato. It also discussed inclusion of Aviation Turbine Fuel (ATF) under GST, but deferred a decision since most states were not in favour of losing their right to tax it.
What, however, caught attention was the clarification the Council offered on why different varieties of popcorn i.e., regular, salted and spiced, and caramelised, carry different rates of GST. This led to some political backlash too, with Congress spokesperson Jairam Ramesh terming it as “absolutely unbelievable” and “sheer madness”.
The Council discussed the tax rate on ready-to-eat popcorn, which is mixed with salt and spices. It took the view and clarified that popcorn with salt and spices has the essential character of a namkeen and should face 5 per cent GST (other than pre-packaged and labelled). The GST should be 12 per cent if the popcorn is pre-packaged and labelled. When mixed with sugar (e.g. caramel popcorn), it was akin to sugar confectionery items (items with ‘added sugar’) and hence, would attract 18 per cent GST.
“There is no new imposition of any tax in this regard and is merely a clarification as certain field units were demanding different tax rates on the same. Therefore, it is a clarification being recommended by the GST Council to settle the disputes arising out of interpretation,” an official statement said. It has been decided to regularise the tax treatment issue for popcorn for the past on “as is where is” basis, it said.
The Group of Ministers (GoM) on rate rationalisation sought more time to discuss the proposal to tweak rates on as many as 148 items, which will also come up for discussion in the Council later. The GoM for compensation cess was also given an extension by the Council to submit its recommendations.
“It’s (rate rationalisation) a holistic exercise for looking at reducing the burden on common, daily use items. And looking at rates which will have to come down from where they were now for over five years. There is a level of stabilisation which all agreed to in the Council. So they are looking at it in a very holistic fashion,” Union Finance Minister Nirmala Sitharaman said after the Council meeting.
For taxation of used electric vehicles, the GST Council recommended a harmonisation of the GST rate on sale of old and used vehicles including EVs at 18 per cent. Sitharaman said the Council decided to raise the rate of tax to 18 per cent from 12 per cent on all used EV sales, just as in case of non-electric vehicles.
For sale of used EVs between individuals, no GST will be levied. On sale of used EVs apart from individuals, 18 per cent GST will be levied on margin of the supplier, that is, the difference between the purchase price and selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle. “At present new EV cars attract 5 per cent GST. So, Centre, having 1/3rd voting right, suggested GST on old and used EV should also be 5 per cent. However, after a detailed deliberation, it was agreed for 18 per cent on the margin for selling old and used EVs,” Sitharaman said.
In other key rate changes, the GST Council recommended that no GST will be payable on penal charges levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms, or in other words, loan defaults. The Council also recommended reduction in the GST rate on fortified rice kernels to 5 per cent from 18 per cent irrespective of end use along with deciding to grant exemption for gene therapy.
A concept note on small companies facing registration problems was given in-principle approval by the GST Council. This may require amendments to be made to the GST laws to make it easier for small companies to register, Sitharaman said.
No decision was taken on levy of tax on charges on delivery of food by quick commerce and food delivery platforms. “This has been deferred,” Sitharaman said, adding the Fitment Committee will again review it and the issue being debated is if the tax should be equivalent to 5 per cent GST levied on food or more.
Earlier in the day, Bihar’s Deputy Chief Minister Samrat Chaudhary, who is also the convenor of ministerial panels on rate rationalisation and insurance premiums, had said that many ministers were of the view that one more meeting should happen to discuss the issues in detail before final submission of the GoM’s report. “Whether it is for group insurance, individual insurance or senior citizens’ insurance, we will do another meeting for it. We will discuss it all in the next meeting,” Chaudhary said.
The Council also took up discussion of inclusion of aviation turbine fuel (ATF) under the ambit of GST, but the matter will be discussed at length later. A special demand by Andhra Pradesh to discuss levy of 1 per cent additional GST over and above the topmost 28 per cent rate in case of disasters, broadly on the lines of flood cess levied by Kerala in 2019, was discussed in the Council. The GST Council agreed to refer this discussion for a special levy for disasters to a GoM.
Sources said there was no consensus in the meetings of the GoM on insurance premiums as some states were concerned about the revenue loss impact for states from the proposed reduction in GST rates. Also, comments from insurance regulator IRDAI are awaited on the issue of lowering GST on insurance premiums.
The GoM had earlier discussed exempting GST on premiums paid by senior citizens for health insurance and premiums paid by all for term life insurance. GST on term life insurance premiums were discussed to be exempted for all persons, including plans that consist of family members. Exemption of health insurance premium paid by senior citizens irrespective of coverage was also under consideration.
For other citizens, health insurance cover till Rs 5 lakh was considered to be exempted. The existing rate of 18 per cent would have been then continued for health insurance cover over Rs 5 lakh.
