The 55th Goods and Services Tax (GST) Council meeting chaired by Union Minister Nirmala Sitharaman, Ministry of Finance (MoF) and Ministry of Corporate Affairs (MoCA) was held on December 21, 2024 at Jaisalmer, Rajasthan.
- Among several recommendations by the GST Council, the most notable was the reduction of GST rate on Fortified Rice Kernels (FRK) to 5%.
Key People:
i.Union Minister of State (MoS) Pankaj Chaudhary, MoF; Pramod Sawant, Chief Minister (CM) of Goa; Conrad Sangma, CM of Meghalaya; Omar Abdullah, CM of Jammu & Kashmir (J&K); Mohan Charan Manji, CM of Odisha and Nayab Singh Saini, CM of Haryana attended the meeting.
ii.Also, deputy CMs of Arunachal Pradesh (AR), Bihar, Madhya Pradesh (MP), and Telangana; besides Finance Ministers (FMs) of States & Union Territories (UTs) (with legislature) and other senior officials of the MoF and States/ UTs were present at the meeting.
Key Changes in GST Rates on Goods:
i.Reduction of GST on FRK: The GST Council has decided to reduce the GST rate on FRK which is classifiable under HS Code 1904, from 18% to 5%.
ii.Gene Therapy Exempted from GST: It has decided to exempt gene therapy completely from GST. This move aims to make advanced medical treatments more accessible for people.
iii.Extension of IGST Exemption to Sytems for LRSAM Assembly: The Council has extended Integrated Goods and Services Tax (IGST) exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, software used for the manufacturing of Long Range Surface-to-Air Missile (LRSAM) system. This will boost defence sector in India.
iv.Reduction of Rate of Compensation Cess: The Council has decided to reduce the rate of compensation cess on supplies to merchant exporters to 0.1%.
v.IGST Exemption to Equipments for IAEA Inspections: The Council has decided to exempt from IGST imports of all equipment and consumable samples for inspection by the International Atomic Energy Agency (IAEA), supporting international regulatory compliance.
vi.Extension of Concessional 5% GST rate on food inputs: The Council has decided to extend the concessional 5% GST rate on food inputs of food preparations under HSN 19 or 21 that are supplied for food preparations used for  free distribution to economically weaker sections (EWS) under various Government of India (GoI) led programs subject to the existing conditions.
List of Goods with Revised GST Rates:
| S.NO. | Name of Items | Previous GST Rate | New GST Rate |
|---|---|---|---|
| 1. | Fortified Rice Kernels (FRK) | 18% | 5% |
| 2. | Gene Therapy | 12% | 0% |
Key Recommendations related to GST on Services:
i.The GST Council has recommended to bring supply of the sponsorship services offered by the body corporate under Forward Charge Mechanism.
ii.The GST Council has decided to exempt GST on the contributions made by general insurance companies from the 3rd-party motor vehicle premiums to the Motor Vehicle Accident Fund (MVA Fund).
Note:Â The MVA Fund was constituted under Section 164B of the Motor Vehicles Act, 1988, which aims to provide compensation and cashless medical treatment to victims of road accidents including hit and run cases.
iii.It has decided to eliminate the definition of declared tariff and amend the definition of specified premises (from the services rate and exemption notifications) to link with original value of supply of any unit of accommodation provided by the hotel.
- It has decided to introduce the rate of GST applicable on restaurant services in such hotels, for a given financial year (FY), based on the ‘value of supply’ of units of accommodation made in the preceding FY i.e. 18% with Input Tax Credit (ITC) if the value of supply is more than Rs 7,500 for any unit of accommodation in the preceding FY, and 5% without otherwise.
Key Changes Related to Goods and Services:
i.The Council has decided to raise the GST rate from12% to 18% on sale of all old and used vehicles, including Electric Vehicles (EVs) except: those specified at 18%-sale of old and used petrol vehicles of engine capacity of 1200 cubic capacity (cc) or more and of length of 4000millimetre (mm) or above; diesel vehicles of engine capacity of 1500 cc or above and length of 4000 mm and SUVs.
- This new GST rate is applicable only for registered persons.
- Also, it is applicable only on the value that represents margin of the supplier i.e. the difference between the purchase price and selling price of used vehicle.
ii.The Council has clarified that Autoclaved Aerated Concrete (ACC) blocks containing over 50% fly ash content will be categorised under HS 6815 and attract GST rate of 12%.
iii.It further clarified that pepper either fresh green or dried pepper and raisins when supplied by an agriculturist/farmer is exempted from GST.
iv.The GST Council has recommended amendment to the definition of ‘pre-packaged and labelled’ to include all commodities that are intended for retail sale and containing not more than 25 kilogram (kg) or 25 litre (l), which are ‘pre-packed’ as defined under the Legal Metrology Act.
v.The GST Council has clarified that ready to eat popcorn which is mixed with salt and spices are classifiable under HS 2106 90 99 will attract 5% GST if supplied as other than pre-packaged and if supplied as pre-packaged and labelled, will attract 12% GST.
- However, when popcorn is mixed with sugar for example caramel popcorn will be referred under ‘sugar confectionary’ category and will also be classifiable under HS 1704 90 90, will be taxed 18% GST.
vi.It has clarified that the Reserve Bank of India (RBI) regulated Payment Aggregators (PAs) who are handling transactions less than Rs 2,000, are exempted from indirect tax as they fall within the ambit of ‘acquiring bank’ as defined in the said entry.
- But, this exemption will not cover Payment Gateway (PG) and other fintech services which do not involve settlement of funds.
vii.The GST Council has clarified that no GST is payable on the ‘penal charges’ levied and collected by banks and Non-Banking Financial Companies (NBFCs) or any other Financial Institutions (FIs) from borrowers for non-compliance with loan terms.
List of Goods and Services with Revised GST Rates:
| S.NO. | Name of Items | Previous GST Rate | New GST Rate |
|---|---|---|---|
| 1. | Sale of all old and used vehicles, including Electric Vehicles (EVs) | 12% | 18% |
| 2. | Ready to Eat popcorn mixed with salt and spices, if supplied as pre-packaged and labelled | 5% | 12% |
| 3. | Ready to Eat popcorn mixed with sugar | 5% | 18% |
Key Measures to simplify provisions related to taxability of Vouchers:
The GST Council has decided to eliminate sections 12(4) and 13(4) from Central Goods and Services Tax (CGST) Act, 2017 and rule 32(6) from CGST Rules, 2017. This decision will help in resolving ambiguities in the treatment of vouchers.
i.It has also clarified that transactions in vouchers will be considered neither as a supply of goods nor as a supply of services.
ii.It has mentioned that vouchers which are distributed on prinicipal-to-principal basis will not be subject to GST.
- While, for vouchers distributed on principal-to-agent basis, the commission or any fee charged by the agent for such distribution is taxable under GST.
Other Key Measures:
i.The GST Council has recommended to insert an enabling provision in CGST Act, 2017 through Section 148A, to empower the government to enforce the ‘Track and Trace Mechanism’ for specified evasion-prone commodities.
Other Key Points:
i.The GST Council approved the proposal of the committee of officers suggesting measures for the various issues raised by the states in respect of issues related to IGST settlement and directed the committee to conclude the desired changes by March, 2025.
ii.The GST has extended the time frame for the Group of Ministers (GoMs) on the restructuring of the GST Compensation till June 30, 2025.
About Goods and Services Tax (GST) Council:
GST Council is a constitutional body introduced through 101st Amendment Act, 2016 in the constitutiona. It was constituted under Article 279-A of the constitution.
Chairperson- Nirmala Sitharaman, Union Finance Minister (Rajya Sabha member- Karnataka)
