In this blog, we will cover key GST rate changes, compliance updates, legal reforms, and trade facilitation measures from the 55th GST Council Meeting.
The 55th GST Council meeting was held in Jaisalmer, Rajasthan, on December 21, 2024, chaired by Union Finance Minister Smt. Nirmala Sitharaman. Finance ministers and senior officials from various states and union territories participated. Key reforms were discussed regarding GST rates, trade facilitation, and compliance streamlining.
55th GST Council Meeting Highlights
A. Changes in GST Rates:
Goods:
- Fortified Rice Kernel (FRK): GST rate reduced to 5%.
- Gene Therapy: Fully exempted from GST.
- LRSAM Systems: IGST exemption extended on assembly/manufacturing components.
- Merchant Export Supplies: Compensation cess reduced to 0.1%.
- IAEA Inspections: IGST exemption for specified equipment and samples.
- Food Preparations for Free Distribution: Concessional 5% GST rate extended.
Services:
- Sponsorship Services: Brought under the Forward Charge Mechanism.
- Motor Vehicle Accident Fund: Exemptions for third-party motor premium contributions.
- Hotel Accommodation & Restaurant Services: GST rates tied to the preceding year’s supply value, effective April 1, 2025.
- Composition Levy Scheme Rent: Revised reverse charge mechanism excludes composition taxpayers.
Clarifications on Goods and Services:
- Old and Used Vehicles: GST increased to 18%, applicable only on supplier’s margin.
- Autoclaved Aerated Concrete Blocks: GST clarified at 12%.
- Agricultural Produce: Exemptions for green/dried pepper and raisins supplied by agriculturists.
- Packaged Goods Definition: Revised to align with retail sales regulations.
- Popcorn Classification: GST rates clarified (5%, 12%, 18%).
- RBI-Regulated Payment Aggregators: GST exemption, excluding payment gateways.
- Penal Charges: No GST on penalties for loan non-compliance.
B. Measures for Trade Facilitation:
- Schedule III Amendment: Transactions in SEZ/FTWZs before export/domestic use not treated as goods or services.
- Voucher Taxability: No GST on unredeemed vouchers (“breakage”). Principal-to-agent distribution remains taxable.
- ITC Clarifications: ITC for goods delivered Ex-Works clarified as permissible.
- Annual Return Late Fee Waiver: Partial waiver for delayed filings of FORM GSTR-9C (2017-18 to 2022-23) if completed by March 31, 2025.
C. Compliance Streamlining:
- Track and Trace Mechanism: Introduced via Section 148A of CGST Act to prevent tax evasion.
- Online Services Taxation: Suppliers must record the recipient’s state for accurate GST application.
- Pre-Deposit Amendments: Reduced pre-deposit requirement from 25% to 10% for penalty-only appeals.
- Temporary Identification Number (TIN): Introduced for non-registered entities making GST payments.
D. Legal and Procedural Reforms:
- Section 17(5)(d) Amendment: Retrospective change to clarify ITC eligibility for “plant and machinery.”
- Input Service Distributor (ISD) Reforms: Adjusted provisions to include interstate reverse charge mechanism (RCM).
- Invoice Management System (IMS): Framework for generating GSTR-2B forms based on supplier actions, mandating ITC reconciliation.
E. Other Key Decisions:
- GST Compensation Restructuring: Deadline extended to June 30, 2025.
- Natural Disaster Levy: Group of Ministers to examine the imposition of levies in disaster-affected states.
- FSI Charges by Municipalities: Deferred for further examination.
- GSTAT Rules: Procedural rules approved, awaiting notification after legal review.
Significance and Implementation
These reforms are designed to simplify tax compliance, reduce ambiguities, and promote fairness in GST application. Once notified, the changes will enhance legal clarity and operational efficiency for stakeholders. The key reforms, including rate reductions, ITC clarifications, and voucher taxability, support the government’s objectives to facilitate trade, reduce disputes, and streamline processes.
Press Release of 55th GST Council Meeting
The complete press release issued after the conference is available for download on the official Finance Ministry website.
You can access it directly via the following link: Download Press Release
