The 55th GST Council meeting was chaired by Union Finance Minister Smt. Nirmala Sitharaman on December 21, 2024, at Jaisalmer, Rajasthan. It included reforms on the related GST changes in tax rates, measures to facilitate trade, and streamlining of compliance. Union Minister of State for Finance Shri Pankaj Chaudhary, Chief Ministers, Deputy Chief Ministers, Finance Ministers of States/UTs, and other senior officials also attended.

Key Recommendations

1. GST Rate Adjustments on Goods:

• Fortified Rice Kernel (FRK): The GST rate on FRK, classified under HSN code 1904, has been reduced to 5%.
• Gene Therapy: GST has been fully exempted on gene therapy treatments, making them more accessible.
• Long Range Surface-to-Air Missile (LRSAM) Systems: IGST exemption has been extended to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, and software intended for the assembly or manufacture of LRSAM systems under Notification 19/2019-Customs.
• Compensation Cess: The rate of Compensation Cess has been reduced to 0.1% on supplies to merchant exporters, aligning it with the GST rate on such supplies.
• International Atomic Energy Agency (IAEA) Imports: IGST exemption has been granted on imports of all equipment and consumable samples by the IAEA's Inspection Team, subject to specified conditions.
• Food Preparations for Economically Weaker Sections: The concessional 5% GST rate on food inputs for food preparations under HSN codes 19 or 21, intended for free distribution to economically weaker sections under government programs, has been extended, subject to existing conditions.

2. GST Rate Adjustments on Services:

• Sponsorship Services: The supply of sponsorship services provided by body corporates has been brought under the Forward Charge Mechanism.
• Motor Vehicle Accident Fund: GST has been exempted on contributions made by general insurance companies from third-party motor vehicle premiums to the Motor Vehicle Accident Fund, established under Section 164B of the Motor Vehicles Act, 1988.
• Hotel Accommodation and Restaurant Services: It is defined that the term 'declared tariff' has not been defined, while the term 'specified premises' is changed so that the same will relate to the actual value of supply of any unit of accommodation given by a hotel. Restaurant services GST will depend on 'value of supply' units of accommodation of the earlier financial year. These will come into effect on 1 April 2025 and help to smooth out the transition. Hotels may also choose to pay tax at 18% with ITC and declare this before the beginning of the financial year or at the time of obtaining registration.
• Composition Levy Scheme: The entry at Sr. No. 5AB brought renting of commercial immovable property by unregistered persons to registered persons under the reverse charge mechanism. This entry is hereby excluded from taxpayers registered under the composition levy scheme. The period from October 10, 2024, till the date of issuance of the proposed notification shall be regularised on an "as is, where is" basis.

3. Other Key Decisions:

• Used and Old Vehicles: The GST rate on the sale of all used and old vehicles, even electric ones, has been raised to 18% from the previous level of 12%. The exclusion for this rise in rates applies to some categories as well, like old petrol vehicles with engine capacity over 1200 cc and having a length over 4000 mm; diesel engine capacity over 1500 cc and having a length over 4000 mm; and SUVs. GST applies only to the value that is representing the margin of the supplier, which is the difference between the purchase price and selling price; if depreciation is claimed, the value is the depreciated value, not the value of the vehicle.
   
• Autoclaved Aerated Concrete (ACC) Blocks: It has been clarified that ACC blocks containing more than 50% fly ash content will fall under HSN code 6815 and attract 12% GST.
• Pepper and Raisins: Pepper, whether fresh green or dried, and raisins, when supplied by an agriculturist, are not liable to GST.
• Ready-to-Eat Popcorn: Ready-to-eat popcorn mixed with salt and spices falls under HSN code 2106 90 99 and attracts 5% GST if supplied other than pre-packaged and labelled, and 12% GST if supplied as pre-packaged and labelled. However, when the popcorn is mixed with sugar, it changes its character to sugar confectionery, such as caramel popcorn, and falls under HSN code 1704 90 90, attracting 18% GST. This clarification sets to rest disputes as regards different tax rates being applied by field units on the same product.
• Vouchers: The GST Council has recommended that no GST is payable on the transaction of vouchers, as they are neither a supply of goods nor a supply of services. The provisions related to vouchers are also being simplified.
• Penal Charges: No GST is payable on 'penal charges' levied and collected by banks and non-banking financial companies (NBFCs) from borrowers for non-compliance with loan terms.
• Pre-Deposit for Appeals: The GST Council has recommended a reduction in the payment of pre-deposit

Implications for Businesses

Cost Reduction: Lower GST rates on essential goods like fortified rice and medical therapies will benefit consumers and promote public health initiatives.

• Export Promotion: IGST exemptions and cess reductions enhance competitiveness for exporters.
• Clarity in Compliance: Simplifications in ITC claims, voucher taxability, and SEZ transactions reduce litigation risks and improve ease of doing business.
• Sector-Specific Reliefs: Agriculture, hospitality, and financial services gain clarity on GST applicability, reducing uncertainties.
• Consumer Protection: Measures like unique identification for tracking goods aim to curb tax evasion and ensure market transparency.

Conclusion

Significant reforms have been brought in place for streamlining GST compliance, dispelling ambiguities, and promoting trade facilitation during the 55th GST Council Meeting. Through the agenda involving reductions in tax rates, exemptions, and procedural reforms, the Council has reaffirmed its intention towards a simplified GST structure. This will contribute to accelerated economic growth, better compliance, and greater transparency in taxation.

Also Read :Transition Provisions Under GST