GST Rate Changes as Per Notification No. 05/2024
GST Rate Changes as Per Notification No. 05/2024 On October 8, 2024, the Ministry of Finance issued Notification No. 05/2024-Central Tax (Rate), amending the GST rates for various products under the Central Goods and Services Tax Act, 2017 (CGST Act, 2017). GST Rate Changes as Per Notification No. 05/2024 This notification, effective from October 10, 2024, introduces several changes in GST classifications and rates for specific goods, ranging from pharmaceutical drugs to snack foods and motor vehicle seats.
In this blog, we’ll break down the key amendments to help taxpayers and businesses better understand the new GST rate structure and its implications.
Overview of the Changes: What’s New?
GST Rate Changes as Per Notification No. 05/2024 The notification primarily introduces amendments to the GST rates applicable to specific products across four distinct schedules. GST Rate Changes as Per Notification No. 05/2024 Let’s review the changes introduced in each schedule:
1.1 Schedule I – GST Rate: 2.5%
GST Rate Changes as Per Notification No. 05/2024 Three new pharmaceutical items have been added to the 2.5% GST rate category, making them more affordable and accessible for consumers. GST Rate Changes as Per Notification No. 05/2024 These drugs are commonly used in advanced cancer treatments and have been included in the low-tax bracket to reduce the burden on patients. GST Rate Changes as Per Notification No. 05/2024
Newly Added Items:
- Trastuzumab Deruxtecan:
- A targeted cancer therapy drug primarily used to treat certain types of breast cancer.
- Osimertinib:
- A medication used in the treatment of non-small cell lung cancer (NSCLC).
- Durvalumab:
- An immunotherapy drug used to treat specific cancers, including bladder and lung cancer.
Implication: The reduced GST rate of 2.5% on these life-saving drugs will likely lead to lower treatment costs for patients and encourage better compliance by pharmaceutical companies in terms of tax reporting and pricing.
1.2 Schedule II – GST Rate: 6%
A new entry has been made under Schedule II, specifying the GST rate for extruded or expanded products, which are commonly found in the snack food industry.
New Entry:
- 1905 90 30: Extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets, by whatever name called, manufactured through a process of extrusion).
Explanation:
- These products include a variety of processed snacks and extruded food items like puffed snacks, which have now been classified under a 6% GST rate. GST Rate Changes as Per Notification No. 05/2024
- Prior to this notification, the classification for extruded snack products was ambiguous, resulting in confusion among manufacturers regarding applicable GST rates.
Implication: This clarification will streamline compliance for snack food manufacturers and ensure uniform tax treatment for similar products, potentially resulting in minor price adjustments for end consumers.
1.3 Schedule III – GST Rate: 9%
Two significant amendments have been made to Schedule III, impacting the GST treatment for certain snack products and seats.
- Amendment to S. No. 16:
- New Description: Un-fried or un-cooked snack pellets, by whatever name called, manufactured through a process of extrusion, extruded or expanded products, savoury or salted.
- This amendment expands the scope of the description to cover all types of extruded and expanded savoury or salted products, eliminating overlaps with other schedules.
- Substitution of S. No. 435A:
- Revised Description: Seats (other than those of heading 9402), whether or not convertible into beds and parts thereof other than seats of a kind used in aircraft or seats of a kind used for motor vehicles.
- This amendment clarifies that all types of seats not used in motor vehicles or aircraft will attract a 9% GST rate.
Implication: The reclassification of seats may impact industries manufacturing seating arrangements for trains, ships, or commercial furniture. Businesses must revisit their product classifications to ensure compliance with the revised GST rates.
1.4 Schedule IV – GST Rate: 14%
A new item has been inserted under Schedule IV, setting a higher GST rate for certain motor vehicle seats:
New Entry:
- 9401 20 00: Seats of a kind used for motor vehicles.
Explanation:
- Seats specifically designed for motor vehicles now fall under the 14% GST rate category. This change aims to align GST treatment for motor vehicle components and parts.
Implication: Automotive component manufacturers may experience a change in pricing structure due to the increased GST rate, which could lead to a marginal increase in costs for automotive seat manufacturers and dealers.
- Practical Implications for Businesses and Consumers
The amendments introduced in this notification have far-reaching implications for businesses, particularly those in the pharmaceutical, snack food, and automotive sectors. Let’s explore some key points to consider:
2.1 Impact on Pharmaceutical Companies
GST Rate Changes as Per Notification No. 05/2024 The inclusion of cancer treatment drugs like Trastuzumab Deruxtecan, Osimertinib, and Durvalumab under the 2.5% GST rate is a positive development. Pharmaceutical companies need to update their product classifications and GST invoicing systems to reflect the new rates. Additionally, hospitals and healthcare providers must adjust their pricing and procurement strategies to pass on the benefit to patients.
2.2 Impact on Snack Food Manufacturers
With the clear classification of extruded and expanded products under Schedule II (6%) and Schedule III (9%), snack food manufacturers now have a more definitive understanding of the applicable GST rates. They should review their product categories and reclassify their offerings accordingly to ensure accurate GST filing.
2.3 Impact on Automotive Sector
The higher GST rate of 14% on motor vehicle seats could lead to increased production costs for automotive companies. This change will likely be passed on to consumers, resulting in a minor price increase for vehicles equipped with these seats. Manufacturers must update their inventory and billing systems to comply with the revised rates.
Compliance Guidelines for Businesses
To comply with the new GST amendments, businesses should:
- Update Accounting Systems:
- Ensure that all accounting and ERP systems are updated to reflect the revised GST rates.
- Review Invoices and Purchase Orders:
- Check pending invoices and purchase orders to apply the correct GST rate, especially for transactions occurring after October 10, 2024.
- Communicate with Vendors and Customers:
- Notify key stakeholders, including suppliers and customers, about the changes to avoid discrepancies in future transactions .GST Rate Changes as Per Notification No. 05/2024
- File GST Returns Accurately:
- Amend any ongoing GST returns to reflect the new rates, if applicable, to avoid penalties and interest charges.
Conclusion
Notification No. 05/2024-Central Tax (Rate) introduces critical updates to the GST rate structure, impacting various sectors. GST Rate Changes as Per Notification No. 05/2024 Businesses must act promptly to incorporate these changes and maintain compliance. Proper classification, accurate invoicing, and systematic updates to internal processes will ensure smooth implementation of the revised GST rates.
For more information or detailed queries on how these changes might impact your business, feel free to reach out or leave a comment below!
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