Key Highlights from the 55th GST Council Meeting

The 55th GST Council meeting, chaired by Union Finance Minister Smt. Nirmala Sitharaman, was held in Jaisalmer, Rajasthan, with participation from state and UT Finance Ministers, Chief Ministers, and senior officials. The Council discussed significant changes to GST tax rates, trade facilitation measures, and compliance streamlining. Below are the key recommendations and decisions:

I. Changes in GST Rates

Goods

1. Fortified Rice Kernel (FRK): GST reduced to 5%.
2. Gene Therapy: Exempted from GST.
3. LRSAM Systems: IGST exemption extended to systems and parts meant for assembly/manufacture under Notification 19/2019-Customs.
4. Merchant Exporters: Compensation Cess rate reduced to 0.1% for supplies.
5. IAEA Equipment Imports: Exempted from IGST for specified conditions.
6. Food Preparations for Free Distribution: Concessional GST rate of 5% extended for inputs supplied under government programs.

Services

1. Sponsorship Services: Now under the Forward Charge Mechanism.
2. Motor Vehicle Accident Fund Contributions: Exempted from GST.
3. Hotel Services: GST rate on restaurant services linked to the value of accommodation units in preceding financial years, effective from 01.04.2025.
4. Renting by Unregistered Persons: Exclusion of composition levy taxpayers from reverse charge mechanism introduced under Notification No. 09/2024-CTR.

Other Clarifications on Goods and Services

1. Used Vehicles: GST increased to 18% on certain high-capacity vehicles with tax applied on margin value.
2. Autoclaved Aerated Concrete (ACC) Blocks: GST clarified at 12% for blocks with over 50% fly ash.
3. Agricultural Supplies: No GST on fresh/dried pepper and raisins supplied by agriculturists.
4. Pre-Packaged Commodities: Definition expanded to include retail-sale packages under 25 kg/litres.
5. Popcorn: GST clarified based on preparation—5% (non-prepackaged), 12% (prepackaged), and 18% (sugar confectionery).
6. Payment Aggregators: RBI-regulated aggregators exempted under Notification No. 12/2017-CT(R).
7. Penal Charges: No GST on penalties levied by banks/NBFCs for loan term non-compliance.

II. Measures for Trade Facilitation

1. Schedule III Amendment:
• Goods warehoused in SEZ/FTWZ for exports or Domestic Tariff Area clearance are neither supply of goods nor services, effective 01.07.2017.
2. Vouchers Taxability:
• Transactions in vouchers not treated as supply of goods/services.
• Principal-to-agent distributions remain taxable.
• No GST on unredeemed vouchers (breakage).
3. Circulars for Clarity:
• No ITC reversal for supplies under Section 9(5).
• ITC allowed for goods delivered at supplier’s premises under ex-works contracts.
• Late fee waivers for FORM GSTR-9C delays from 2017-18 to 2022-23, if filed by 31st March 2025.

III. Streamlining Compliance in GST

1. Filing Simplification:
• Proposals for easier compliance with GSTR filing.
• Reduction in disputes through detailed clarifications.
2. ITC Enhancements:
• Streamlined provisions for claiming ITC, addressing ambiguities.
3. Alignment with International Standards:
• Recommendations to align warehousing and voucher taxation with global best practices.

Conclusion

The 55th GST Council meeting introduced impactful changes, emphasizing trade facilitation, clarity in tax provisions, and streamlined compliance. The revised rates and exemptions aim to reduce ambiguities and enhance GST implementation efficiency, supporting businesses and taxpayers alike. Stakeholders are encouraged to stay updated and align with the new regulations for a seamless transition.