The 55th GST Council Meeting

Syllabus: GS3/Taxation

Context

• The 55th GST Council met under the Chairpersonship of the Union Minister for Finance & Corporate Affairs.

Key Highlights

• It postponed a decision on reducing taxes on health and life insurance.
• Premiums on Health Insurance: Premiums paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh is proposed to be exempted from GST.
  • However, 18% GST will continue on premiums paid for policies with health insurance cover of over Rs 5 lakh.
• Fully exempt GST on gene therapy.
• Taxes on Food Delivery Platforms: Cutting taxes on food delivery platforms like Swiggy and Zomato, to 5% (without input tax credit), from the current 18%.
• The compensation cess regime comes to an end in March 2026, and the GST Council has set up a panel of ministers, under the Union Minister of State, to decide the future course of the cess.

Goods and Services Tax

• The GST was introduced in 2017 by the 101st Constitutional Amendment Act, 2016 as a comprehensive indirect tax for the entire country. 
• It is a destination based tax on consumption of goods and services. 
• It is levied at all stages right from manufacture up to final consumption.
  • Only value addition will be taxed and the burden of tax is to be borne by the final consumer.
• It accrues to the State or the Union Territory where the consumption takes place. It is of 3 types:
  • Central GST (CGST): Levied by the Center.
  • State/Union Territory GST (SGST/UTGST): Levied by States or UTs.
  • Integrated GST (IGST): Tax levied and collected by the Center on all inter-state supplies of goods and/or services.
    • The Center settles accounts with the States/UTs by transferring the SGST/UTGST portion of IGST to the destination state where goods/services were consumed.
• Four slabs for taxes for both goods and services: Currently, GST is a four-tier tax structure with slabs at 5, 12, 18 and 28%.
  • Luxury and demerit goods are taxed at the highest bracket of 28%, while packed food and essential items are at the lowest 5% slab.
• A cess is levied on the highest tax slab of 28% on luxury, sin and demerit goods.
  • The collection from the cess goes to a separate corpus called Compensation fund. It is used to make up for revenue loss suffered by the state due to GST rollout.

GST Council

• The GST Council is a constitutional body under Article 279A.
• Composition: It is a federal body comprising the Union Finance Minister as its Chairman and Finance Ministers of all States as members
• Decision Making: It makes decisions by a simple majority, requiring at least three-fourths of the weighted votes of the members present.
  • The central government’s votes account for one-third of the total, while all state governments combined hold two-thirds of the voting power.
• Objective: The Council operates as a joint forum between the Centre and States, addressing disputes and facilitating uniformity.
• Major Functions of the GST Council: 
  • The Council determines which products and services fall under the GST and which do not.
  • It frames laws and standard procedures that guide the administration of GST.
  • The Council acts as a dispute resolution mechanism between the Centre and States or among states.
  • The Council drafts special provisions for certain states, particularly for the Northeast and hilly regions.
  • The Council supervises the GST framework and ensures it undergoes periodic reforms to align with current economic realities.

Source: TH