GST Council Meeting Outcomes: What Are Key Takeaways......What FM Nirmala Sitharaman Said

In the 55th meeting of the GST Council, held today in Jaisalmer, Union Finance Minister Nirmala Sitharaman unveiled a series of significant decisions aimed at simplifying the Goods and Services Tax (GST) framework and addressing key sectoral concerns.  One of the most notable announcements from the meeting was the extension of the Integrated Goods and Services Tax (IGST) exemption on surface-to-air missiles. This decision is expected to ease the financial burden on defense imports and support the government’s ongoing efforts to strengthen the nation’s defense capabilities.

GST Rate Cut on Fortified Rice Kernels
In another important decision, the GST Council approved a reduction in the tax rate on fortified rice kernels to 5%. This measure is part of a broader government initiative to combat malnutrition in India by promoting the use of fortified rice as a key nutritional supplement in food distribution programs.

Clarifications on GST for Construction Materials and Agricultural Goods
The Finance Minister also clarified the tax rates for certain construction materials and agricultural products. Specifically, ACC blocks containing 50% fly ash will attract a GST rate of 12%. Additionally, Sitharaman confirmed that black pepper and raisins supplied by agriculturalists are exempt from GST, providing much-needed clarity for farmers and traders in the agricultural sector.

Reduction in Compensation Cess for Merchant Exporters
To provide a boost to the export sector, the Council decided to reduce the compensation cess on supplies to merchant exporters. This move aims to increase working capital for exporters and make them more competitive in the international market.

Clarification on GST for Penal Charges
The GST Council also provided clarification on the treatment of penal charges. It was confirmed that penal charges levied and collected by banks and non-banking financial companies (NBFCs) for loan defaults will not attract GST, offering relief to financial institutions and borrowers.

Payment Aggregators Exemption
In a step to support digital transactions, the Council approved an exemption for payment aggregators handling transactions below Rs 2,000. However, this exemption does not extend to payment gateways or fintech services, which remain subject to GST.

No Consensus on Including ATF under GST
While the aviation sector has long advocated for the inclusion of Aviation Turbine Fuel (ATF) under the GST framework, Sitharaman announced that no agreement had been reached among states on this matter. Many states consider ATF to be part of the fuel basket, and the Council did not approve the formation of a Group of Ministers (GoM) to further explore this issue.

Health Insurance and Rate Rationalization Discussions
The Council also discussed ongoing issues related to health insurance premiums and rate rationalization. Sitharaman revealed that the Group of Ministers (GoM) tasked with discussing health insurance premiums required more time, as inputs from the Insurance Regulatory and Development Authority of India (IRDAI) are still pending. Similarly, the GoM on rate rationalization also needed more time to finalize its report, delaying any immediate changes to tax rates on luxury goods, life insurance, and other sectors.

Popcorn Tax Controversy Resolved
One of the more unusual but widely discussed topics was the GST treatment of caramelized popcorn. The issue arose after certain states began classifying caramelized popcorn as "namkeen," which carries a lower tax rate. Sitharaman clarified that popcorn with added sugar, such as caramelized popcorn, falls under a separate tax bracket due to the added sugar content, which attracts a different rate compared to plain or salted popcorn.