55th GST Council Meeting Overview

Table of Contents

Introduction: Overview of 55th GST Council Meeting

The 55th GST Council Meeting, chaired by the Union Finance Minister, addressed several critical areas, including tax rate changes, trade facilitation measures, compliance streamlining, and clarifications on ambiguous issues. The recommendations aim to provide relief to individuals, improve trade processes, and streamline GST provisions. Below is a detailed and structured analysis of the decisions, including relevant sections, notifications, and conditions.

image of 55th council meeting

A. GST Rate Changes for Goods in the 55th GST Council Meeting

1. Reduction in GST Rate on Fortified Rice Kernel (FRK)

  • New GST Rate: 5% (reduced from 18%).
  • HSN Code: 1904.
  • Applicability: Fortified rice used in social welfare schemes like public distribution systems.
  • Impact: Aims to make fortified rice affordable, promoting nutritional enhancement initiatives.

2. Exemption of GST on Gene Therapy

  • Scope: GST exemption is granted for specified gene therapies as notified by the government.
  • Conditions: Applicable only to therapies listed under approved medical categories.
  • Impact: This move promotes accessibility to innovative treatments in healthcare.

3. IGST Exemption on Components for Long-Range Surface-to-Air Missiles (LRSAM)

  • Notification Reference: Notification 19/2019-Customs.
  • Applicability: Import of components such as systems, subsystems, and testing equipment for LRSAM production.
  • Condition: Subject to end-use certification by the Ministry of Defence.

4. Concessional Compensation Cess for Merchant Exporters

  • New Rate: 0.1% GST.
  • Scope: Exporters supplying goods under merchant export schemes.
  • Impact: Ensures parity in tax rates and supports exporters by reducing tax liabilities.

5. IGST Exemption for IAEA Inspection Teams

  • Scope: Applies to equipment and consumables imported for International Atomic Energy Agency inspections.
  • Conditions: Requires documentation to validate IAEA usage.

6. Extension of 5% GST on Inputs for Free Distribution Programs

  • Applicable HSN Codes: 1901 and 2106.
  • Scope: Food preparations distributed to economically weaker sections under government welfare programs.

B. GST Rate Changes for Services in the 55th GST Council Meeting

1. Sponsorship Services Now Under Forward Charge

  • Mechanism Change: Shifted from Reverse Charge Mechanism (RCM) to Forward Charge Mechanism (FCM).
  • Applicability: Sponsorship services provided by body corporates.
  • Impact: Simplifies compliance and enhances tax collection efficiency.

2. Exemption on Contributions to Motor Vehicle Accident Funds

  • Relevant Section: Section 164B of the Motor Vehicles Act, 1988.
  • Scope: Contributions by insurance companies from third-party motor insurance premiums.
  • Impact: Reduces compliance burden on insurance providers.

3. Revised Hotel and Restaurant GST Rates

  • New Rates (Effective 1 April 2025):
    • 18% with ITC for room tariffs exceeding ₹7,500.
    • 5% without ITC for tariffs below ₹7,500.
  • Condition: Hotels must opt for the 18% rate at the beginning of the financial year.

4. RCM Exemption for Rent Payments by Composition Levy Taxpayers

  • Notification Reference: Notification No. 09/2024-CTR.
  • Scope: Renting of commercial properties by unregistered landlords to registered businesses.
image of meeting 55th council

C. Clarifications on Goods and Services in the 55th GST Council Meeting

1. GST on Sale of Used Vehicles

  • Taxable Base: GST applies to the margin (selling price minus purchase price).
  • Revised Rates:
    • 18% GST on used vehicles, including electric vehicles (EVs).
    • Higher rates apply to specified heavy-duty vehicles.

2. Classification of Autoclaved Aerated Concrete (AAC) Blocks

  • HSN Code: 6815.
  • GST Rate: 12% for AAC blocks with more than 50% fly ash content.

3. GST on Agricultural Products

  • Scope: Fresh or dried pepper and raisins supplied by agriculturists are exempt from GST.
  • Clarification: This exemption ensures that direct farm produce remains tax-free.

4. Pre-Packaged Commodities Definition Updated

  • Scope: Retail packs up to 25 kg/litre are classified as “pre-packaged and labelled.”
  • Relevant Law: As per the Legal Metrology Act.

5. GST on Popcorn

  • Clarification:
    • 5% GST for salted popcorn.
    • 12% GST for pre-packaged salted popcorn.
    • 18% GST for caramel popcorn, classified under sugar confectionery.

6. Exemption for RBI-Regulated Payment Aggregators

  • Scope: Payment aggregators working as acquiring banks are exempt from GST.
  • Clarification: Other fintech services and gateways remain taxable.

7. No GST on Penal Charges for Loan Defaults

  • Scope: Penal charges for non-compliance with loan terms do not constitute a supply.

D. Trade Facilitation Measures

1. Amendment to Schedule III for SEZ Transactions

  • Section: Paragraph 8, Schedule III of the CGST Act, 2017.
  • Effective Date: Retrospective applicability from 1 July 2017.
  • Scope: Supplies within SEZ/FTWZ prior to export or clearance to DTA are not treated as supply.

2. Treatment of Vouchers

  • Clarifications:
    • Transactions involving vouchers are neither goods nor services.
    • GST is not applicable on unredeemed vouchers.

3. ITC Reversal Not Required for Section 9(5) Supplies

E. Compliance Reforms

1. Pre-Deposit for Appeals in Penalty Cases

  • New Pre-Deposit Requirement: 10% of the penalty amount for appeals to appellate authorities or tribunals.
  • Relevant Sections: Section 107 and 112 of the CGST Act.

2. Introduction of Track-and-Trace Mechanism

  • New Provision: Section 148A of the CGST Act.
  • Scope: Mandates Unique Identification Marking for goods prone to evasion.

3. Late Fee Waiver for Delayed GSTR-9C Filing

  • Scope: Waiver applies for FY 2017-18 to 2022-23 filings made before 31 March 2025.
  • Impact: Encourages timely filing by reducing the penalty burden.

Final Thoughts on 55th GST Council Meeting

The 55th GST Council Meeting introduced a host of taxpayer-friendly measures and addressed various ambiguities in GST provisions, signaling the government’s commitment to simplifying GST processes and enhancing trade facilitation. These changes, once notified, are expected to have a far-reaching impact on trade, compliance, and tax administration across India.

For more updates, in-depth analyses, and expert insights on GST and Income tax related matters, follow TaxGroww to stay informed and ahead!

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