The 36th GST Council Meeting convened on July 27, 2019, marked a pivotal moment in India’s journey towards redefining its tax structure and promoting sustainable practices. Chaired by the Hon’ble Union Finance Minister, Ms. Nirmala Sitharaman, this virtual gathering brought together key stakeholders to deliberate on crucial agendas, ranging from the reduction of GST rates on electric vehicles to the intricacies of lottery taxation.
In the Council’s efforts to balance economic issues with environmental concerns the decisions made in this session have left long-lasting impacts on the tax regime, commercial compliance, and the pledge to pursue the green ways of transport. The overview highlights the discussions, decisions, and the taxpayers, business, and economic impact made in the meeting.
Key Agendas Discussed in the 36th GST Council Meeting
The key agendas discussed in the 36th GST Council Meeting held on 27th July 2019 through video conference were:
GST rate reduction on electric vehicles (EVs)
The Council reduced the GST rate from 12% to 5% on EVs from 1st August, 2019. The government made this decision in line to enhance the acceptability of EVs in India. The rate reduction was also applicable to chargers and charging stations for EVs.
GST treatment of lotteries
The Council deferred the decision on the GST treatment of lotteries due to the differential tax treatment of state-owned and state-authorized lottery players. The Council had earlier decided to seek a legal opinion of the Attorney General to determine the tax structure for lotteries.
Confirmation of the Minutes of the 35th GST Council Meeting
The Council confirmed the Minutes of the 35th GST Council Meeting held on June 21, 2019.
Status of GST implementation
The Council reviewed the status of GST implementation and discussed various issues related to GST compliance.
Other agenda items
The Council also discussed other agenda items, including the following:
- Review of the GST compensation to states
- Simplification of the GST return filing process
- Rationalization of GST rates on certain goods and services
Highlights of the 36th GST Council Meeting
The 36th GST Council Meeting highlighted discussions on environmental considerations, taxation principles, and the promotion of electric vehicles, ultimately resulting in key decisions to support a cleaner and sustainable future.
Confirmation of Minutes
The Council confirmed the minutes of the 35th GST Council Meeting held on 21st June 2019 with minor editorial corrections suggested by Gujarat and Goa.
Deemed Ratification of Notifications
Notifications, circulars, and orders issued by the Central Government between 12th June 2019 and 19th July 2019 were deemed ratified by the GST Council.
Decisions of GST Implementation Committee (GIC)
The Council noted the decisions of the GST Implementation Committee taken between 11th May 2019 and 19th July 2019.
Issues Recommended by Fitment Committee
Changes in GST Rate on Electric Vehicles:
- The Fitment Committee’s recommendations to reduce GST rates on electric vehicles to 5%, electric vehicle chargers from 18% to 12%, and exempt GST on hiring electric buses by local authorities were discussed.
- Some members suggested a sunset clause for the incentive, while others argued against it.
- Varied opinions were expressed on the GST rate for electric vehicle chargers, with suggestions for both 5% and 12%.
- Concerns were raised about potential revenue losses and the impact on the existing automobile industry.
- A proposal to reduce GST on BS VI-compliant vehicles and hybrid vehicles was also discussed.
- The Council approved the reduction of GST rates on electric vehicles to 5% and on electric vehicle chargers to 12%.
- The exemption of GST on hiring electric buses by local authorities was also approved.
- The issue of the GST rate on Lithium-ion batteries of power banks was requested for clarification.
- Some members expressed concerns about the potential impact on revenue and the existing automobile industry.
Proposal by West Bengal Minister
- The Hon’ble Minister from West Bengal emphasized the need for a balanced approach towards reducing pollution, considering both traditional and emerging industries.
- Proposed a reduction in taxes on electric vehicles from 12% to 5% to boost investment, along with incentives for BS VI-compliant and hybrid vehicles.
Concerns about Rapid Transition
NITI Aayog’s announcement of a complete shift to electric vehicles by 2025 raised concerns, especially considering the earlier target of 2040. Some members felt the transition should be gradual to support traditional industries.
Discussion on Electricity Production and Pollution
The Finance Minister from West Bengal highlighted potential challenges, expressing concerns that increased demand for electricity to power electric vehicles might lead to higher pollution from carbon emissions.
Suggestions and Support
- Various states expressed support for the proposed reduction in GST rates on electric vehicles and chargers.
- Some members suggested limitations on incentives and reviews after a specific period to avoid an inverted tax structure.
Several states supported the proposals, emphasizing the environmental benefits and positive impact on health by encouraging electric vehicles.
Concerns Raised by Punjab
The Finance Minister from Punjab raised concerns about revenue losses in states due to decreased sales of petrol products and emphasized the importance of considering the fate of the existing automobile industry.
Suggestions were made to consider the holistic impact on existing industries, revenue losses in destination states, and potential demands from other competing industries with environmental concerns.
- The Chairperson acknowledged the concerns but highlighted the Council’s focus on promoting electric vehicles for a cleaner future.
- A unanimous decision was reached to reduce GST rates on electric vehicles and chargers to 5%, emphasizing the commitment to a sustainable and less-polluting mode of transportation.
The Finance Minister from West Bengal requested meticulous recording of the proceedings to ensure a balanced reflection of the overall sense of the Council’s discussions.
Electric Vehicle Tax Rates
- The Council discussed proposals to reduce GST rates on electric vehicles and chargers.
- The West Bengal Minister expressed concerns about the impact on destination states and the existing automobile industry.
- Despite opposition from Punjab, the Council unanimously decided to reduce GST rates on electric vehicles and chargers to 5% from August 1, 2019.
- The Chairperson emphasized the importance of promoting environmentally friendly vehicles for a cleaner future.
Discussion on Tax Principles:
- The Punjab Minister, on a lighter note, highlighted the paradoxical nature of taxation principles.
- The Chairperson urged Punjab to support the environmental initiative, emphasizing the Council’s commitment to a progressive and cleaner India.
Support for Electric Vehicles
- The Odisha Minister supported the electric vehicle proposal from both environmental and economic perspectives.
- Concerns were raised about the potential revenue impact on destination states and the existing automobile industry.
Effective Date for Changes
- The Secretary proposed an effective date of August 1, 2019, for the changes in GST rates on electric vehicles and chargers.
- The Council agreed to the proposed effective date for implementing the new rates.
Extension of Filing Dates
- The Council approved the extension of the last date for filing FORM GST CMP-02 to September 30, 2019, and FORM GST CMP-08 to August 31, 2019.
- The extension aimed to provide taxpayers with sufficient time for compliance.
Appreciation for Officers
- The Secretary acknowledged the transfer of three senior officers who had contributed significantly to the GST regime.
- The Council recorded appreciation for their tireless efforts and commendable work in both pre-GST and post-GST periods.
Acknowledgement and Thanks
- Officers received gratitude from many members of the states, including West Bengal, Goa, and Odisha for their tremendous contribution.
- The officers were appreciated and awarded for their dedication.
Next GST Council Meeting
The agenda item regarding the date of the next GST Council meeting was not discussed.
The meeting concluded with thanks to the Chair, acknowledging the collaborative efforts and decisions made during the session.
Updates on the Implementation and Outcome of the 40th GST Council Meeting Highlights
|GST Rate Reduction on Electric Vehicles (EVs)
|Implemented since August 1, 2019
|Significant decrease in EV prices, increased adoption of EVs
|GST Treatment of Lotteries
|Decision deferred due to ongoing discussions
|Standardization of tax structure for all lottery operators
|Simplification of GST Return Filing Process
|Introduction of pre-filled forms, simplified forms for small taxpayers, integration with other tax portals
|Streamlined GST compliance for businesses
|Rationalization of GST Rates on Certain Goods and Services
|Periodic review and rationalization of GST rates
|Balanced and fair tax structure, reduced tax burden on consumers, promoted economic growth
GST Rate Reduction on Electric Vehicles (EVs)
The implementation of the reduction of the GST rates of electric vehicles from 12% to 5% began effectively on August 1, 2019. EVs have become far more affordable than they were before because of this intervention. Thus making India witness a progressive use of EVs.
GST Treatment of Lotteries
The decision on the GST treatment of lotteries remains deferred due to the ongoing discussions on standardizing the tax structure for both state-owned and state-authorized lottery players. The government is aiming to ensure a fair and equitable tax system for all lottery operators.
Simplification of GST Return Filing Process
Several measures have been implemented to simplify the GST return filing process, including:
- The introduction of pre-filled forms with taxpayer information to reduce manual data entry
- The development of simplified return forms for small taxpayers
- The integration of GST return filing with other tax portals
These initiatives have significantly streamlined the GST compliance process for businesses.
Rationalization of GST Rates on Certain Goods and Services
The GST Council has periodically reviewed and rationalized GST rates on various goods and services to ensure a balanced and fair tax structure. Some recent examples include:
- Reduction in GST rates on certain essential food items
- Standardization of GST rates on similar products across different categories
These adjustments have aimed to alleviate the tax burden on consumers and promote economic growth.
What does this Meeting have for Taxpayers and Businessmen?
Reduced GST Rates for Electric Cars (EVs)
The reduction of the GST rates for electric vehicles from 12% to just 5% has been a crucial step towards promoting the use of eco-friendly cars in India. This also reduces the cost of cars for consumers and encourages them to purchase these EVs, thereby fostering the growth of these vehicles.
GST Treatment of Lotteries
The deferral of the decision on the GST treatment of lotteries indicates the government’s intention to streamline the tax structure for both state-owned and state-authorized lottery players. A more uniform and transparent tax regime could simplify compliance for lottery operators and potentially increase revenue for the government.
Simplified GST Return Filing Process
The introduction of pre-filled forms, simplified forms for small taxpayers, and integration with other tax portals significantly simplifies the GST return filing process for businesses. This reduces the cost of administration, saves time, and minimizes the possibility of errors, therefore, helping businesses to comply and reduce compliance costs.
Rationalization of GST Rates on Certain Goods and Services
The periodic review and rationalization of GST rates on various goods and services ensure a balanced and fair tax structure for businesses. This ongoing process helps maintain a predictable tax environment, allowing businesses to make informed business decisions and plan effectively.
Additional Benefits for Businesses
In addition to the above, the 36th GST Council Meeting brought about other benefits for businesses, including:
- GST review compensation to states: The review of GST compensation by the council to states is designed to see that businesses do not suffer unfair tax payments and that states receive adequate support for the implementation of GST.
- GST rates rationalization on inputs: The Council’s efforts to harmonize GST rates on inputs can help lower the overall price of goods and services with possible benefits to consumers and businesses.
- Measures to address tax evasion: The Council’s attention to dealing with tax evasion ensures a competitive environment in favor of compliant businesses.
The 36th GST Council Meeting revealed that the government is consistently trying to improve the GST ecosystem for businesses and taxpayers. These modifications are intended to foster economic growth, simplify compliance, and improve transparency and fairness of the Indian taxation system.
For more information on the 36th GST Council Meeting, please visit the official website of the Central Board of Indirect Taxes and Customs (CBIC) at https://cbic-gst.gov.in/ or https://gstcouncil.gov.in/gst-council-meetings