GST Council Decides to Levy 18% Tax on Margin Value of Used Electric Vehicles

New Delhi, December 17: The Goods and Services Tax (GST) Council has decided to levy an 18 per cent tax on the margin value of used electric vehicles sold by businesses, in a move aimed at boosting revenue collection. This decision is part of the Council's 55th meeting, where it also discussed various other issues related to taxation.

The GST Council, headed by Union Finance Minister Nirmala Sitharaman, decided that no tax will be payable on penal charges levied and collected by banks and non-banking financial companies (NBFCs) from borrowers for non-compliance with loan terms. The decision aims to alleviate the burden of borrowers, especially in cases where defaults have occurred due to unforeseen circumstances.

Regarding insurance products, the GST Council did not take a decision on reducing tax rates, pending comments from the sector regulator. However, it decided to exempt premium paid by senior citizens for health insurance cover and term life insurance policies from GST, with recommendations still being considered.

The panel also discussed the levying of VAT on aviation turbine fuel (ATF), which has been kept out of the 'one-nation-one-tax' regime since its introduction. The central government imposed excise duty on ATF in 2017, while states levy VAT on it.

In a significant move, the GST Council decided to clarify taxability on popcorn, stating that caramelized popcorn will attract an 18 per cent rate whereas pre-packaged and spiced popcorn will attract a 12 percent rate. Unpackaged and unlabelled popcorn, however, will receive a 5 percent tax.

Furthermore, the GST Council also reduced the tax rate on fortified rice kernels used for public distribution to 5 per cent from 18 per cent, with Union Finance Minister Sitharaman stating this decision was in favor of small businesses. The panel further agreed that no GST would be payable on penalties imposed by banks and NBFCs on borrowers.

Additionally, the GST Council deferred a decision on reducing tax rates on insurance premiums, pending comments from regulators. It also postponed the deadline for submissions to the Goods and Services Compensation Cess (GSCC) report to early 2025 despite initial concerns of exceeding 31st December deadline