Updated on: December 23rd, 2024 2:51 PM

Key highlights of the 55th GST Council Meeting

The 55th GST Council Meeting, held on December 21, 2024, brought forward a series of important decisions and clarifications aimed at simplifying tax procedures, enhancing business compliance, and addressing key issues in the Goods and Services Tax (GST) regime. The meeting introduced several critical changes, including GST exemptions, rate adjustments, and procedural improvements. These decisions are designed to provide relief to various sectors, resolve compliance challenges, and streamline the GST framework. In this article, we will delve into the key highlights and detailed outcomes of the meeting.

Key Highlights from the 55th GST Council Meeting

Here are the important decisions made during the recent GST Council Meeting:

• Extension for Group of Ministers (GoM) Reports: The GoM was formed to address issues related to compensation cess, rate rationalisation, and health insurance, and it was granted an extension to submit its report.
• GST Exemption for Payment Aggregators: Payment aggregators handling payments below ₹2,000 have been exempted from GST. However, this exemption applies only to aggregators and does not cover payment gateways or fintech services not involved in fund settlements.
• No GST on Penal Charges for Loan Non-Compliance: Penal charges collected by banks and non-banking financial companies (NBFCs) from borrowers for non-compliance with loan terms are exempt from GST.
• Exemption for Agriculturist Supplies: Supplies of dried black pepper and raisins made by agriculturists will not attract GST.
• Clarification on GST for Caramelised Popcorn: Caramelised popcorn will be taxed similarly to products with added sugar. This means it will not fall under the 5% GST rate applicable to salted popcorn, classified as a namkeen.
• Delayed Decision on GST for Food Delivery Apps: The Council deferred discussions on the GST applicable to food delivery charges by quick commerce platforms or food delivery apps.
• Taxation on Used Electric Vehicles (EVs): No GST for Individual-to-Individual Sales: Used EVs sold between individuals will not attract GST.
• GST on Refurbished EVs by Businesses: If a business sells a used EV after refurbishment, an 18% GST will apply to the margin value (difference between purchase price and sale price), similar to other used vehicles.
• Reduced Compensation Cess for Merchant Exporters: The Council recommended reducing the rate of Compensation Cess to 0.1% on supplies to merchant exporters, aligning it with the GST rate for such transactions.
• Exemption for IAEA Inspection Imports: Imports of equipment and consumable samples by the International Atomic Energy Agency (IAEA) inspection team will be exempt from IGST, subject to specified conditions.

Changes in GST Rates of Goods - 55th GST Council Meeting

Several goods and services saw changes in their GST rates or clarifications after the 55th GST Council Meeting:

S. No.	Goods/Services	HSN/SAC Code	Current Rate	Recommended Rate
1	Fortified rice kernels	1904	18%	5%
2	Gene therapy to treat life-threatening diseases	–	Taxable	Exempted
3	Food items for free distribution under government programs	19 or 21	Taxed higher	5%
4	ACC blocks (concrete) containing more than 50% fly ash	6815	5%	12%
5	Fresh/dried black pepper and dried raisins by agriculturist	904	5%	No GST
6	Approved skill training partners of NSDC	9992	18%	Exempted
7	Sale of used Electric Vehicles (EV) by and to individuals	–	Taxed higher	5%
8	Sale of used EVs by businesses after refurbishment	–	12%	18% on profit
9	Sub-systems of Long Range Surface to Air Missile (LRSAM)	9023	Taxable	Exempted
10	Bank/NBFC penal charges for loan defaults	–	Taxed	Exempted

Also read GST Rates for Different Goods and Services in India - Slabs, Rates, & Revision

55th GST Council Meeting Key Decisions on Services

The 55th GST Council Meeting introduced several significant changes to the taxation and compliance requirements for various services to simplify processes and enhance transparency for businesses and consumers alike.

Sponsorship Services under the Forward Charge Mechanism

The supply of sponsorship services by body corporates will now fall under the Forward Charge Mechanism, ensuring better compliance and streamlined taxation.

Exemption on Contributions to 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 (constituted under Section 164B of the Motor Vehicles Act, 1988). This fund is aimed at providing compensation and cashless treatment for victims of road accidents, including hit-and-run cases.

Amendments to Hotel Tariff and Restaurant Services Taxation

The definition of declared tariff will be omitted and replaced with a framework linking GST rates to the actual value of the supply of accommodation units in hotels. For hotels, the GST rate for restaurant services will be determined based on the previous financial year’s value of supply:

• 18% with ITC if the value exceeds ₹7,500 per unit of accommodation.
• 5% without ITC for other cases.
• Hotels can choose to pay 18% with ITC by declaring their option at the start of the financial year or during registration.

These changes will take effect from 1st April 2025 to allow a smooth transition.

Exclusion of Composition Levy Taxpayers from Reverse Charge Mechanism

Taxpayers registered under the composition levy scheme are excluded from reverse charge mechanism applicability under entry Sr. No. 5AB (Notification No. 09/2024-CTR dated 08.10.2024), which brought renting of commercial or immovable property under RCM. The period from 10th October 2024 to the issuance of the proposed notification will be regularised on an “as is where is” basis.

GST Clarifications and Amendments

The Council also issued several clarifications and amendments to improve GST compliance:

• Amendment to CGST Act and Rules: Several amendments were made regarding invoice management, reversal of input tax credit for credit notes, and updates to the GST filing process.
• Waiver of Late Fees for GSTR-9C Filings: Late fees for delays in filing FORM GSTR-9C for the years 2017-18 to 2022-23 will be waived, provided the form is filed by March 31, 2025.
• Reduction in Pre-Deposit for Appeals: The pre-deposit requirement for GST appeals related to penalties has been reduced from 25% to 10%.
• Changes for Non-Registered Individuals: Temporary GST identification numbers can be issued to individuals who need to make specific tax payments but are not required to be registered under GST.

Other Changes Relating to Goods and Services

The 55th GST Council Meeting also brought forth important amendments and clarifications related to goods and services:

Revised GST Rate for Used Vehicles

• The GST rate for the sale of all old and used vehicles, including electric vehicles (EVs), has been increased from 12% to 18%, except for specific cases already at 18%:
  • Petrol vehicles with engine capacity ≥ 1200 cc and length ≥ 4000 mm.
  • Diesel vehicles with engine capacity ≥ 1500 cc and length ≥ 4000 mm.
  • SUVs.
  • GST applies only to the margin value (difference between purchase and sale price or depreciated value if claimed), not the entire vehicle value.

This change does not apply to unregistered persons.

Classification of Autoclaved Aerated Concrete (ACC) Blocks

• ACC blocks containing more than 50% fly ash content fall under HS 6815 and attract 12% GST.
• Exemption for Pepper and Raisins Supplied by Agriculturists
• Pepper (fresh or dried) and raisins supplied by an agriculturist are exempt from GST.

Amendment to ‘Pre-Packaged and Labelled’ Definition

The definition has been revised to include all retail commodities weighing up to 25 kg or 25 litres, which require declarations under the Legal Metrology Act and related rules. GST on Popcorn Varieties

• Ready-to-eat popcorn:
  • 5% GST if not pre-packaged and labelled.
  • 12% GST if pre-packaged and labelled.
• Caramel popcorn (with added sugar) is classified as sugar confectionery under HS 1704 90 90 and attracts 18% GST.

These clarifications aim to resolve past disputes and will be regularised on an "as is where is" basis. Exemption on Penal Charges by Banks and NBFCs No GST will apply to penal charges levied by banks and NBFCs for non-compliance with loan terms.

Measures for Facilitating Trade in the 55th GST Council Meeting

The 55th GST Council Meeting introduced several key measures aimed at simplifying trade procedures, resolving long-standing issues, and providing clarity on various GST-related matters to enhance overall business operations.

• Changes in Tax Rules for Special Zones (SEZ/FTWZ):  Goods stored in Special Economic Zones (SEZ) or Free Trade Warehousing Zones (FTWZ) will not be taxed until they are either exported or sent to regular markets. This is similar to the tax treatment of goods in Customs bonded warehouses.
• New Rules for Vouchers: Vouchers (like gift cards or discount coupons) will not be treated as goods or services for tax purposes.
  • If vouchers are given out directly by a company (not through an agent), no tax applies. But if an agent is involved, the agent's fees will be taxed.
  • Services like advertising, marketing, or customer support related to vouchers will be taxed based on how much is paid for these services.
  • If vouchers are not used (breakage), no tax is charged on the unclaimed amount.

• Clarifications on Tax Credit and Filing

• • Tax Credit Reversal for Online Platforms: Online platforms (like e-commerce) don’t have to reverse taxes on certain supplies that they pay taxes on directly.
  • Tax Credit on Goods Delivered: If goods are delivered to a business (not directly to the buyer), the business receiving the goods can still claim the tax credit.

• Late Fees on Annual Returns: If businesses were late in filing their annual returns (GSTR-9 and GSTR-9C) between 2017 and 2023, the GST Council has waived extra late fees. To get this benefit, businesses must submit the forms by March 31, 2025.

Key Measures Announced to Streamline GST Compliance

The 55th GST Council Meeting introduced key measures to simplify GST compliance, enhance transparency, and strengthen the regulatory framework:

Introduction of Track and Trace Mechanism

The GST Council has recommended inserting a new provision under Section 148A of the CGST Act, 2017, granting the Government the authority to implement a Track and Trace Mechanism for specific commodities prone to evasion. This system will utilise a unique identification marking on goods or their packaging, enabling better traceability throughout the supply chain. This legal framework aims to strengthen the monitoring of certain goods, ensuring transparency and compliance.

Clarification on Recording Details for Online Services

A clarification has been issued regarding the recording of the correct details for the supply of online services to unregistered recipients. Suppliers of services like online money gaming and OIDAR (Online Information and Database Access or Retrieval) services must ensure they record the name of the recipient’s state on the tax invoice. This state name will be considered the recipient's address for the purposes of Section 12(2)(b) of the IGST Act, 2017, and the relevant provisions of the CGST Rules, 2017.

Other Measures Pertaining to Law & Procedure 

Simplifying the Plant and Machinery Rules

The GST Council has recommended an amendment to clarify the rules regarding "plant and machinery." The wording of the law will be changed from "plant or machinery" to "plant and machinery," effective from July 1, 2017.  

Lower Pre-Deposit for Appeals Involving Penalties

For people appealing against GST penalty orders (without involving tax demands), the required pre-deposit will be lowered from 25% to 10%. This applies both to appeals before the Appellate Authority (Section 107) and the Appellate Tribunal (Section 112). 

Clarifying Definitions of Local and Municipal Funds

The Council has clarified the definitions of "Local Fund" and "Municipal Fund" to avoid confusion. This will help ensure that all stakeholders involved in the GST process understand these terms clearly.

Changes to Input Services Distributor (ISD) Rules

The GST rules for distributing tax credits will be updated. The amendments will allow businesses in different states to manage tax credits more easily, especially in cases involving reverse charge mechanism (RCM). These changes will take effect from April 1, 2025.

Temporary Identification Numbers for Non-Registered Individuals

New provisions will allow tax officers to issue temporary identification numbers to people who are not required to be registered under GST but need to make specific tax payments. This will streamline the process and make it easier for businesses to comply.

More Flexibility for Composition Scheme Taxpayers

Taxpayers who choose the composition scheme will now be able to change their "category of registered person" through a simple online form. This makes it easier for businesses to adapt to changing conditions.

Improved Invoice Management System (IMS)

Several important updates will be made to the Invoice Management System (IMS):

• GSTR-2B: The system will be updated to automatically generate GSTR-2B based on taxpayer actions, simplifying the reconciliation process.
• Credit Notes: There will be clearer rules on how to handle credit notes, including a requirement for businesses to reverse input tax credits when credit notes are issued.
• Filing GSTR-3B: A key change is that businesses will only be able to file their monthly tax return (GSTR-3B) after their GSTR-2B (which includes details of input credits) is available on the portal.

Press Release of 55th GST Council Meeting

Access the complete press release issued by the Finance Ministry following the 55th GST Council Meeting held on 21st December 2024. The release provides detailed information on key decisions, clarifications, and amendments discussed and approved during the meeting.

Conclusion

In conclusion, the 55th GST Council Meeting has introduced several transformative changes aimed at simplifying the GST system and improving business compliance. By addressing critical issues such as rate adjustments, exemptions, and procedural reforms, the Council is paving the way for a more efficient and business-friendly tax environment. These updates are expected to ease operational challenges, foster smoother compliance, and benefit all stakeholders within the GST framework.