Blogs

Latest GST Updates..

1. Differential GST Rates on Popcorn:

The GST Council has introduced varying tax rates for popcorn based on its preparation:

  • Non-branded popcorn with salt and spices: 5% GST
  • Pre-packaged and branded popcorn: 12% GST
  • Caramel popcorn (categorized as sugar confectionery): 18% GST

This decision has sparked criticism for adding complexity to the GST system.

2. Rejection of Aviation Fuel Inclusion in GST:

The GST Council has declined the airline industry’s proposal to include aviation turbine fuel (ATF) under the GST regime. Currently, state governments set their own taxes on ATF, and they oppose its inclusion in GST due to potential revenue losses.

3. Uniform Tax on Aircraft and Engine Parts:

India has implemented a uniform 5% tax on all imports of aircraft components and engine parts, replacing the previous rates that ranged from 5% to 28%. This move aims to simplify the tax structure and encourage growth in the local maintenance, repair, and overhaul (MRO) sector.

4. Consideration of Reduced GST on Food Delivery Services:

The GST Council is contemplating reducing the GST on food delivery charges by e-commerce platforms from 18% to 5%. If implemented, this change would not allow food delivery companies to claim tax credits.

5. Key GST Changes Effective from November 1, 2024:

  • Waiver of Unlevied or Short-Levied GST: The government now has the authority to waive GST that was not levied or was short-levied due to a general practice, allowing taxpayers to rectify past errors without penalties.
  • Introduction of Form GST DRC-03A: This form facilitates the appropriation of payments made via the original Form GST DRC-03, simplifying tax liability management.
  • Changes to Reverse Charge Mechanism (RCM) Rules: A 30-day time limit has been imposed on recipients to issue invoices under RCM from the date of receipt of supplies, ensuring timely compliance.
  • Restriction on Input Tax Credit (ITC) for Section 74 Demands: The restriction on ITC availability in cases where tax is paid under Section 74 of the CGST Act is now limited to demands up to FY 2023-24.
  • Introduction of New GST Forms SPL-01 and SPL-02: Starting January 2025, these forms are required to claim exemptions of interest and penalties under Section 128A of the GST Act.

6. Introduction of the Invoice Management System (IMS):

 

With Effect from October 1, 2024, the GST Network introduced the IMS to streamline Input Tax Credit (ITC) claims. This system requires buyers to review and take action on invoices uploaded by their suppliers, aiming to minimize ITC mismatches and reduce compliance issues. 

GST on the sale of old and used cars by registered dealers 

The GST Council, in its 55th meeting held on December 21, 2024, announced an increase in the GST rate on the sale of old and used cars by registered dealers from 12% to 18%. This revised rate applies to all categories of vehicles, including electric vehicles (EVs).

Applicability of GST:

  • Registered Dealers: For businesses engaged in the purchase and sale of used vehicles, GST is applicable at 18% on the profit margin. The profit margin is calculated as the difference between the selling price and the purchase price of the vehicle. If the margin is negative (i.e., the selling price is lower than the purchase price), no GST is payable.

  • Individual Sellers: When an unregistered individual sells a used car to another individual, GST is not applicable. This exemption ensures that private transactions between individuals remain unaffected by GST.

Valuation under the Margin Scheme:

Under the margin scheme, GST is levied only on the profit margin of the sale made by registered dealers. For example:

  • Positive Margin:

    • Purchase Price: ₹5,00,000
    • Selling Price: ₹6,00,000
    • Profit Margin: ₹1,00,000
    • GST (18% on ₹1,00,000): ₹18,000

  • Negative Margin:

    • Purchase Price: ₹12,00,000
    • Selling Price: ₹9,00,000
    • Profit Margin: -₹3,00,000
    • GST: Not applicable

Consequently, GST is levied only on the actual value addition by the dealer.

The media has enterpreted the fact in different manner and spred the wrong fact about this chanegs. Now the various imapact are explained below

Impact on Buyers and Sellers:

  • Buyers: Purchasing a used car from a registered dealer may result in a slight price increase due to the higher GST rate on the dealer’s profit margin. However, since GST is applied only to the margin and not the total vehicle price, the overall tax impact remains moderated.

  • Individual Sellers: Private individuals selling their used cars directly to other individuals are not subject to GST, maintaining the tax-free nature of such personal transactions   

CA KUMAR MADAN 

Faculty of Indirect Tax

Leave a Reply