GST Council rationalises rates on select services

The GST Council on Saturday decided to make exemptions / changes in GST rates / ITC eligibility criteria as also rationalise rates, make exemptions and issue clarifications on levy of GST on services.

The decisions of the GST Council meeting chaired by union minister for railways, coal and finance and corporate affairs Piyush Goyal, enclosed as annexure, proposes multiple reliefs from GST taxation on select categories of services.

These changes will be given effect to through Gazette notifications / circulars.

The GST Council has proposed rationalisation of rates on agriculture, farming and food processing industry; education, training and skill development and pension, social security and old age support.

Hotel industry has been given major relief by providing that the rate of tax on accommodation service shall be based on transaction value instead of declared tariff.

Services provided in sectors like banking, IT have been provided relief by exempting services supplied by an establishment of a person in India to any establishment of that person outside India (related party).

As a green initiative, GST on supply of e-books has been reduced from 18 to 5 per cent.

Annexure – exemptions and changes in GST rates on services:

Farming, agriculture and food processing

  • Exempts services by way of artificial insemination of livestock (other than horses);
  • Exempts warehousing of minor forest produce in line with exemptions provided to the agricultural produce;
  • Exempts works of installation and commissioning undertaken by DISCOMS/ electricity distribution companies for extending electricity distribution network up to the tube well of the farmer/ agriculturalist for agricultural use;
  • Exempts services provided by FSSAI to food business operators.
  • Education, training and skill development;
  • GST rate reduced from 18 per cent to 5 per cent on supply only of e-books for which print version exist;

Social security, pension and benefits to senior citizens

  • Exempts services provided by coal mines' provident fund organisation to the PF subscribers from the applicability of GST on the lines of EPFO;
  • Exempts supply of services by an old age home run by state / central government or by a body registered under 12AA of Income Tax Act) to its residents (aged 60 years or more) against consideration up to Rs25,000 per month per member provided consideration is inclusive of charges for boarding, lodging and maintenance;
  • Exempts GST on the administrative fee collected by National Pension System Trust;
  • Exempts services provided by an unincorporated body or a non-profit entity registered under any law for the time being in force, engaged in activities relating to the welfare of industrial or agricultural labour or farmer; or for the promotion of trade, commerce, industry, agriculture, art, science, literature, culture, sports, education, social welfare, charitable activities and protection of environment, to own members against consideration in the form of  membership fee up to an amount of one thousand rupees per member per year.

Banking, finance and insurance

  • Exempts reinsurance services provided to specified insurance schemes such as Pradhan Mantri Rashtriya Swasthya Suraksha Mission (PMRSSM) (Ayushman Bharat), funded by government.

Government services

  • Exempts services provided by the government to ERCC by way of assigning the right to collect royalty, DMFT etc from the mining lease holders;
  • Exempts guarantees given by central/state government/UT administration to their undertakings/PSUs.

Miscellaneous

  • Exempts GST on import of services by foreign diplomatic missions/ United Nations and other international organizations based on reciprocity;
  • Exempts services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons in accordance with IGST Act provisions;
  • Prescribes GST rate slabs on accommodation services based on transaction value instead of declared tariff, which is likely to provide major relief to the hotel industry;
  • Prescribes GST rate of 12 per cent with full ITC under forward charge for composite supply of multimodal transportation;
  • Rationalises the notification entry prescribing reduced GST rate on composite supply of works contract received by the government or a local authority in the course of their sovereign functions:
  • Rationalises entry relating to composite supply of food and drinks in restaurant, mess, canteen, eating joints and such supplies to institutions (educational, office, factory, hospital) on contractual basis at GST rate of 5 per cent; and making it clear that the scope of outdoor catering under 7(v) is restricted to supplies in case of outdoor/indoor functions that are event based and occasional in nature.

The council has also issued the following clarifications:

  • Supply of services provided by state and central educational boards to students for conduct of examination will be treated as exempt;
  • Courses run by private ITIs for designated trades are exempt under GST whereas non-designated courses are taxable;
  • GST on premium paid by the governments for implementing PradhanMantri Rashtriya Swasthya Suraksha  Mission (PMRSSM) (Ayushman Bharat) is exempt from GST;
  • Service tax / GST is applicable on services rendered by an Indian architect or consultant in relation to immovable property located outside India to Indian diplomatic missions/posts abroad;
  • ‘Maintenance’ paid by Auroville Foundation to Aurovilians is not liable to GST;
  • Explanation inserted in notification No 13/2017-Central Tax(Rate) to define the term renting of immovable property;
  • Certain services such as “deposit works (expenses for providing electric line/plant) related to distribution of electricity provided by DISCOM, do not attract GST.

Export and other trade facilitation measures

  • Extend the exemption granted on outward transportation of all goods by air and sea by another one year, ie, up to 30 September 2019 as relief to the exporter of goods;
  • Place liability to pay GST on services provided by individual DSAs to banks/NBFCs under reverse charge on the buying banks/NBFCs. However, services by non-individual NBFCs (corporate, partnership firms) to banks/NBFCs would continue under forward charge, as at present.