GST Council has taken decisions regarding GST rate on certain services

Dec 26, 2018 | by Avantis RegTech Legal Research Team

GST Council in the 31st meeting held on 22nd December, 2018 took following decisions relating to changes in GST rates, ITC eligibility criteria, exemptions and clarifications on connected issues. The same would be given effect to through Gazette notifications/ circulars which shall have force of law.

Reduction in GST rates/exemptions on certain services:

·         GST rate on third party insurance premium of goods carrying vehicles shall be reduced from 18% to 12% Services supplied by banks to Basic Saving Bank Deposit (BSBD) account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY) shall be exempted.

·         Services provided by GTA to Government departments/local authorities which have taken registration only for the purpose of deducting tax under Section 51 shall be excluded from payment of tax under RCM and the same shall be exempted.

·         Exemption on services provided by Central or State Government or Union Territory Government to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing loans taken by them from financial institutions is being extended to guaranteeing of such loans taken from banks.

Parliament and State legislatures shall be extended the same tax treatment with regard to payment of tax under RCM (reverse charge mechanism) as available to Central and State Governments. Services provided by unregistered Business Facilitator (BF) to a bank and agent of Business correspondent (BC) to a BC shall be put under RCM.

Certain Clarifications:

·         To clarify that the services provided by International Finance Corporation (IFC) and Asian Development Bank (ADB) are exempt from GST in terms of provisions of IFC Act, 1958 and ADB Act, 1966.

·         To clarify that the incentives paid by RBI to Banks under “Currency Distribution and Exchange Scheme” (CDES) are taxable.

·         To clarify under section 11(3) of the Central Goods and Services Tax Act, 2017 that scope of entry for multi-modal transport with GST rate of 12% inserted with effect from date July 26, 2018, covers only transport of goods from a place in India to another place in India, that is, only domestic multi-modal transport.

·         To clarify that the nature of business establishment making supply of food, drinks and other articles for human consumption will not determine whether the supply by such establishments is a supply of goods or services. It will rather depend on the constituents of each individual supply and whether same satisfies the conditions / ingredients of a „composite supply‟ or „mixed supply‟.

·         To clarify that GST is exempt on supply of food and drinks by an educational institution when provided by the institution itself to its students, faculty and staff and is leviable to GST of 5% when provided by any other person based on a contractual arrangement with such institutions.

·         To clarify that the banking company is liable to pay GST on the entire value of service charge or fee charged to customers whether or not received via business facilitator or the business correspondent.

·         To issue a clarification to Food Corporation of India (FCI) that the service provided by godown owner in case of lease with services, where the godown owner, besides leasing the warehouse, undertakes to carry out activities of storage and preservation of stored food grains, is the service of storage and warehousing of agricultural produce and the same is exempt.




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