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The GST Council inter-alia made several recommendations relating to changes in GST tax rates.
FM Nirmala Sitharaman addresses media after the GST Council meeting on December 21, 2024
GST Council Meeting Recommendations: The GST Council has made several key recommendations aimed at simplifying and reducing the tax burden in specific areas.
The 55th GST Council met under the Chairpersonship of Union Minister for Finance & Corporate Affairs Nirmala Sitharaman in Jaisalmer, Rajasthan on December 21.
55th GST Council Meeting Highlights
Firstly, the Council has recommended a reduction in the GST rate on Fortified Rice Kernel (FRK), which is classified under HS Code 1904, to 5%. This move aims to make FRK more affordable and accessible.
In addition, the Council has recommended a full exemption of GST on gene therapy, recognizing its potential in medical treatment and the need to make it more accessible to those in need.
The Council has also proposed that contributions made by general insurance companies from third-party motor vehicle premiums to the Motor Vehicle Accident Fund should be exempt from GST. This exemption would help streamline the collection and use of these contributions.
Furthermore, the GST Council clarified that no GST should apply to transactions involving vouchers, as they do not constitute a supply of goods or services. To further simplify matters, provisions related to vouchers are also being revised.
Additionally, the Council has clarified that penal charges levied by banks and Non-Banking Financial Companies (NBFCs) from borrowers for non-compliance with loan terms are not subject to GST.
Lastly, the GST Council has recommended a reduction in the pre-deposit required when filing an appeal before the Appellate Authority in cases where the order in question involves only penalty amounts. This change is intended to make the appeals process more accessible and less financially burdensome for taxpayers.
Complete Details Of 55th GST Council Meeting Recommendations
The GST Council inter-alia made the following recommendations relating to changes in GST tax rates, provide relief to individuals, measures for facilitation of trade and measures for streamlining compliances in GST.
Cheaper and Dearer in GST Council Meeting
Changes in GST rates of goods
Goods
- To reduce the GST rate on the Fortified Rice Kernel (FRK), classifiable under 1904, to 5%.
- To exempt GST on gene therapy.
- To extend IGST exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, and software meant assembly/manufacture of LRSAM system under Notification 19/2019-Customs.
- To reduce the rate of Compensation Cess to 0.1% on supplies to merchant exporters at par with GST rate on such supplies.
- To be exempt from IGST imports of all equipment and consumable samples by the Inspection Team of the International Atomic Energy Agency (IAEA) subject to specified conditions.
- To extend the concessional 5% GST rate on food inputs of food preparations under HSN 19 or 21 that are supplied for food preparations intended for free distribution to economically weaker sections under a government program subject to the existing conditions.
Services
- To bring a supply of the sponsorship services provided by the body corporates under the Forward Charge Mechanism.
- To exempt GST on the contributions made by general insurance companies from the third-party motor vehicle premiums collected by them to the Motor Vehicle Accident Fund, constituted under section 164B of the Motor Vehicles Act, 1988. This fund is constituted for providing compensation/ cashless treatment to the victims of road accidents including hit-and-run cases.
- To omit the definition of declared tariff and suitably amend the definition of specified premises (from the services rate and exemption notifications) to link it with actual value of supply of any unit of accommodation provided by the hotel and to make the rate of GST applicable on restaurant services in such hotels, for a given financial year, dependent upon the ‘value of supply’ of units of accommodation made in the preceding financial year, i.e. 18% with ITC if the ‘value of supply’ exceeded Rs. 7,500 for any unit of accommodation in the preceding financial year, and 5% without ITC otherwise.
-Further, to give the option to pay tax on restaurant service in hotels at the rate of 18% with ITC, if the hotel so chooses, by giving a declaration to that effect on or before the beginning of the financial year or on obtaining registration. The above changes are to be made effective from April 01, 2025, to avoid any transition difficulties.
- To exclude taxpayers registered under composition levy scheme from the entry at Sr. No. 5AB introduced vide Notification No. 09/2024-CTR dated October 08, 2024, vide which renting of any commercial/ immovable property (other than residential dwelling) by unregistered person to registered person was brought under reverse charge mechanism.
Other changes relating to goods and services
1. To increase the GST rate from 12% to 18 % on the sale of all old and used vehicles, including EVs other than those specified at 18% – Sale of old and used petrol vehicles of engine capacity of 1200 cc or more & of length of 4000 mm or more; diesel vehicles of engine capacity of 1500 cc or more & of length of 4000 mm and SUVs.
[Note: GST is applicable only on the Value that represents the Margin of the Supplier, that is, the difference between the Purchase price and Selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle. Also, it is not applicable in the case of unregistered persons.]
2. To clarify that Autoclaved Aerated Concrete (ACC) blocks containing more than 50% fly ash content will fall under HS 6815 and attract 12% GST.
3. To clarify that pepper whether fresh green or dried pepper and raisins when supplied by an agriculturist is not liable to GST.
4. To amend the definition of ‘pre-packaged and labelled’ to cover all commodities that are intended for retail sale and containing not more than 25 kg or 25 litre, which are ‘pre-packed’ as defined under the Legal Metrology Act, or a label affixed thereto is required to bear the declarations under the provisions of the Act and rules.
5. To clarify, ready-to-eat popcorn that is mixed with salt and spices is classifiable under HS 2106 90 99 and attracts 5% GST if supplied as other than pre-packaged and labelled and 12% GST if supplied as pre-packaged and labelled. However, when popcorn is mixed with sugar thereby changing its character to sugar confectionery (e.g. caramel popcorn), it would be classifiable under HS 1704 90 90 and attract 18% GST.
-It has been decided to regularise the issues for the past on “as is where is” basis.
(Note: There is no new imposition of any tax in this regard and is merely a clarification as certain field units were demanding different tax rates on the same. Therefore, it is a clarification being recommended by the GST Council to settle the disputes arising out of interpretation.)
6. To clarify that RBI-regulated Payment Aggregators are eligible for the exemption under entry at Sl. No. 34 of notification No. 12/2017-CT(R) dated June 28, 2017, since they fall within the ambit of ‘acquiring bank’ as defined in the said entry. To also clarify this exemption does not cover payment gateway (PG) and other fintech services that do not involve settlement of funds.
7. To clarify that no GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.