GST Council Meeting: 5% Tax On New EVs, Food Delivery Tax Decision Deferred

The 55th Goods and Services Tax (GST) Council meeting, chaired by Finance Minister Nirmala Sitharaman, introduced significant tax relief measures aimed at fostering economic growth and supporting critical sectors. The council exempted payment aggregators from GST on transactions below Rs 2,000, a move likely to benefit small businesses and promote digital payments across the country.

In a boost to exports, the council decided to reduce the rate of compensation cess on supplies to merchant exporters to a mere 0.1 per cent, enhancing the competitiveness of Indian goods in global markets. Fortified rice kernels also received a tax cut, with the GST rate reduced from 18 per cent to 5 per cent.

Defense manufacturing received a nod of support with the extension of GST exemption on parts used in surface-to-air missile production. Additionally, the council exempted gene therapy treatments from GST, a decision expected to make advanced healthcare more accessible and drive innovation in the medical field.

Among the notable decisions, the council approved a 5 per cent GST rate on new electric vehicles (EVs) to encourage clean mobility adoption. However, used EVs will attract an 18 per cent GST when sold by companies or modified for resale, calculated on the margin between purchase and selling prices. Transactions involving individual-to-individual EV sales will remain exempt from GST.

However, a proposal to lower the GST rate for food delivery platforms such as Swiggy and Zomato from 18 per cent (with input tax credit) to 5 per cent (without ITC) remains unresolved, as the council deferred a decision after extensive discussions.

During the meeting, states opposed the inclusion of aviation turbine fuel (ATF) under GST. Finance Minister Sitharaman explained that states were unwilling to bring ATF under the GST framework, viewing it as part of the broader crude petroleum and diesel basket. “They didn’t feel comfortable. They said it alone cannot be taken out, and therefore it continues to remain where it is today,” she stated.

Source: BW Businessworld