Finance Minister Nirmala Sitharaman said no decision has been taken on bringing ATF under GST umbrella and proposal to tweak rates on insurance products has been deferred. This announcement was made after the 55th GST Council meeting concluded in Jaisalmer on Saturday (December 21). The proposal to lower Goods and Services Tax (GST) on delivery charges for food ordered via e-commerce platforms has been postponed.
In a major move for the construction sector, the GST Council has proposed reducing the tax on fortified rice kernels (FRK) from 18% to 5%. The Finance Minister also clarified that transactions involving vouchers will not be classified as goods or services and, as a result, will not be subject to GST. There was no mention of gaming in the GST Council meeting.
GST Council clarifies on popcorn taxation
The GST Council has clarified the taxation of popcorn, confirming that pre-packed and labelled ready-to-eat snacks will be taxed at 12%, while caramelised popcorn will attract an 18% GST. There is no change in the tax rate for popcorn itself; however, the Central Board of Indirect Taxes and Customs (CBIC) will issue a circular to clarify the current taxation rules.
Ready-to-eat popcorn mixed with salt and spices, which resembles namkeens, is taxed at 5% if not pre-packaged and labelled. When packaged and labelled, the tax rate rises to 12%. Caramel popcorn, due to its sugar content, will be treated as a sugar confectionery and taxed at 18%.
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States reject proposal to bring ATF under GST
States have opposed a proposal to bring Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) regime. Despite periodic requests from the Civil Aviation Ministry and the industry to include ATF in the GST framework, the Council did not reach an agreement on this matter during their discussions.
“States did not feel comfortable, they saw ATF as part of the crude, petroleum, diesel basket, and therefore they said that alone can’t be taken out, so it continues to remain where it is today,” Sitharaman said.
“States want ATF to be outside GST just like petroleum and diesel. They are very clear about this,” Sitharaman added.
At present, Aviation Turbine Fuel (ATF) is not included in the GST regime and is subject to two separate taxes: an excise duty imposed by the central government and a Value Added Tax (VAT) that varies by state. The central excise duty on jet fuel is currently set at 11 percent, with a reduced rate of 2 percent available under the Regional Connectivity Scheme (RCS). State-level taxes on ATF can reach as high as 30 percent in some regions.
GST Council increases tax on used cars, EVs to 18%
In the automotive sector, the GST Council approved a hike in the GST rate on the sale of old and used cars, including electric vehicles (EVs), by businesses, raising it from 12% to 18%. However, this increase will not apply to sales between individuals. Currently, used vehicles (excluding certain petrol and diesel models) are subject to a 12% GST.
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Decision on lowering tax for health, life insurance premiums
In-depth discussions were held on health and life insurance, but the GoM will await inputs from IRDAI before presenting the matter to the GST Council. No timeline has been provided for the GoM’s decision regarding the compensation cess, stated the Finance Minister.
GoM to reassess cess for Disaster Management funding
The Finance Minister announced that the Group of Ministers (GoM) will revisit the proposal for a cess to fund disaster management. The GST GoM will determine if such a cess should apply to all state-level disasters. States have differing opinions on the matter, with some supporting a cess for flood management, while others suggest it should be used for addressing droughts. As a result, the GoM will review these concerns, involving states like Uttar Pradesh, Andhra Pradesh, West Bengal, Telangana, and others in the discussions.
Other proposals under consideration
The GoM has proposed several tax changes, including an increase in the GST on sin goods such as aerated beverages, cigarettes, and tobacco products, raising the rate from 28% to 35%. Other suggestions include adjustments to GST rates for apparel, packaged drinking water, bicycles, and exercise notebooks. Garments priced up to Rs 1,500 would attract a 5% GST, while those between Rs 1,500 and Rs 10,000 would be taxed at 18%. Garments above Rs 10,000 would incur a 28% GST.
The GoM also recommended increasing the GST rate for high-value shoes (over Rs 15,000) and wristwatches (over Rs 25,000) to 28%. Additionally, the proposal to reduce GST on packaged drinking water (20 liters and above) to 5% and lower the rate for bicycles under Rs 10,000 from 12% to 5% is under review. Further deliberations on insurance and GoM reports are expected.
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Who all were present in the 55th GST Council meeting?
The meeting was attended by Minister of State for Finance, Pankaj Chaudhary, along with the Chief Ministers of Goa, Haryana, Jammu and Kashmir, Meghalaya, and Odisha. Also present were the Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, Rajasthan, and Telangana, as well as Finance Ministers from various States/UTs, the Secretary of the Department of Revenue, and senior officials from the Finance Ministry. Chairmen and Members of the Central Board of Indirect Taxes & Customs (CBIC) were also in attendance.
