GST Council Provides Resolutions to Various On-Going Issues

Nitin Konde, Apoorva Bajj

Sep 11, 2024 — 3 min read

GST Council Provides Resolutions to Various On-Going Issues

Several important topics were discussed at the 54th Goods and Services Tax (GST) Council meeting, including online payment processing, the use of helicopters for religious reasons, and the taxation of R&D in educational institutions. In August 2024, India's Goods and Services Tax (GST) receipts were INR 1.75 lakh crore, down from INR 1.82 lakh crore the month before.

Digital payments, insurance, and education are just a few of the areas that could be affected by the several recommendations that the Council considered, even though the overall rise of GST was relatively constant at about 10%, showing resilience in domestic revenue collection. The government's cautious approach to tax reforms was signaled when these suggestions were forwarded to the fitment committee for additional examination.

Growing Domestic Revenue and GST Patterns

GST receipts in India increased by 10.1% to INR 9.14 lakh crore in the first half of the fiscal year. There was a 9.2% increase to INR 1.25 lakh crore in domestic revenue, and an even quicker growth of 12.1% to INR 49,976 crore in revenue from imports. Despite a reduced rate of growth in net domestic revenues (4.9 percent after refunds), this expansion exemplifies the economy's continuous recovery.

Notably, overall net GST revenue stood at INR 1.5 lakh crore, representing a 6.5 percent increase compared to the same month last year. Integrated Goods and Services Tax (IGST) revenues recorded a greater gain of 11.2 percent. A further important factor was the distribution of refunds, which totaled INR 24,460 crore (58% of which went to domestic refunds and the rest to exporters).

The insurance sector plays a significant part in India's tax system; in 2023-24, the federal government and individual states collected INR 8,262.94 crore from health insurance premiums and INR 1,484.36 crore from reinsurance premiums.

Helicopter Services Subject to Lower GST Rates

The GST Council eased the financial burden on tourists and pilgrims by lowering the tax on religious helicopter services from 18% to 5%. Devotees who use helicopter services for pilgrimages to religious locations around India are expected to feel less financial strain as a result of this action.

In areas where pilgrimage sites are difficult to reach, this GST cut will make helicopter services more cheap, encouraging more people to travel there for religious purposes.

Market Behaviour and Insurance Rates

Discussions regarding the Goods and Services Tax (GST) on health and reinsurance premiums have also centered on the insurance industry. Health insurance premiums generated INR 8,262.94 crore for the government as of August 2024. Nevertheless, the insurance sector's taxation has not been changed in any significant way.

Following the meeting of the GST Council, the stock market responded to the premium uncertainty by trading down in the shares of Star Health, ICICI Lombard General Insurance, and Go Digit General Insurance. These businesses could feel the effects of the upcoming health insurance pricing decision, which has already dampened investor enthusiasm.

Examining Research and Development Efforts

Given the notices received by DGGI to universities regarding research funds, the fitment committee will conduct an additional evaluation of the subject of GST on R&D operations in educational institutions. Some universities, like Punjab University and IIT Delhi, have received notifications regarding research funding worth INR 220 crore; they are now seeking for clarification regarding the treatment of these grants under GST.

Institutions of higher learning that depend on research funding are particularly affected by the decision about the GST applicability to these awards. The academic sector may need to consider the recommendations of the fitment committee in the long run.