Industry leaders welcome GST Council's decision to cut rates

In a significant move to provide relief to various sectors, the GST Council on Monday during its 54th meeting announced several key decisions that received a positive response from industry leaders.

One of the most notable decisions was the exemption from GST on import of services by foreign airlines operating through branch offices in India. This relief has come as a big win for the airline industry, especially after the Directorate General of GST Intelligence (DGGI) had demanded taxes of about Rs 39,000 crore from these airlines.

Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co said, “In a major relief to the airline industry, import of services from their head office or other establishments outside the country by foreign airline companies operating through branch offices in India has been exempted from GST. Further, it appears that issues of the past period will also be regularised. This will put an end to the recent show cause notices issued by DGGI seeking GST of about Rs 39,000 crore on foreign airlines operating through branch offices in India.”

The food industry also saw a significant reduction in the GST rate on snacks, which was brought down from 18 per cent to 12 per cent. According to industry leaders, the amendment clarifies the tax treatment prospectively, leaving no ambiguity on the applicable rates.

“Extrusion is a technique used to make ready-to-eat puffed snacks. Since this process is mentioned in HSN entry 1905, which attracts 18 per cent tax, officials were alleging that higher rates apply to the products. However, the industry had classified the said products under entry 2016, which includes namkeen etc, which attract 12 per cent tax. With this amendment, the issue of classification on these products in future has been eliminated,” said Harpreet Singh, partner, Deloitte India.

The Council also exempted critical cancer drugs from tax, reduced GST from 12 per cent to 5 per cent, and introduced GST exemption on services related to helicopter-sharing for religious pilgrimages.

Shivashish Karnani, GST Head, DPNC Global, said, “The Council has taken several steps to rationalise rates, such as reducing GST on cancer medicines from 12 per cent to 5 per cent, snacks, helicopter sharing for pilgrimages, etc., which will reduce the burden on consumers.”

He also pointed to the Council's decision to consider lower GST rates for life and health insurance services through a newly constituted Group of Ministers (GoM), which is expected to report by October 2024.

With a greater emphasis on research and development, the council also provided GST exemption to government universities and research centres on grants received for research activities, a move seen as crucial to boost India's status as a research hub. Meanwhile, discussions about online gaming taxation continue, but no decision has been taken in the latest meeting.