India 55th Goods & Services Tax Council Meeting Summary of Recommendations
The 55th GST Council – which oversees operations and reforms of the indirect tax – convened in Jaisalmer, Rajasthan, on December 21, 2024, under the chairpersonship of Union Finance Minister Smt. Nirmala Sitharaman. The meeting was attended by finance ministers and senior officials from various states and union territories. The Council discussed several key reforms to GST rates, trade facilitation measures, and compliance streamlining efforts.
India implemented GST in 2017.
Key Recommendations
A. Changes in GST RatesGoods:
- Fortified Rice Kernel (FRK): GST rate reduced to 5%.
- Gene Therapy: Fully exempted from GST.
- LRSAM Systems: Extended IGST exemption 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 Forward Charge Mechanism.
- Motor Vehicle Accident Fund: Exemptions for contributions from third-party motor premiums.
- Hotel Accommodation and Restaurant Services: GST rates tied to the preceding year’s supply value, effective April 1, 2025.
- Composition Levy Scheme Rent: Reverse charge mechanism revised to exclude composition taxpayers.
Clarifications on Goods and Services:
- Old and Used Vehicles: GST increased to 18%, applicable only on the 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 for various types (5%, 12%, 18%).
- RBI-Regulated Payment Aggregators: Eligible for GST exemption, excluding payment gateways.
- Penal Charges: GST not applicable on penalties for loan non-compliance.
B. Measures for Trade Facilitation
- Schedule III Amendment: Transactions in SEZ/FTWZs before clearance for export/domestic use are treated as neither goods nor services.
- Voucher Taxability:
- Transactions in vouchers not treated as goods or services.
- Distribution on a principal-to-agent basis remains taxable.
- No GST on unredeemed vouchers (“breakage”).
- Input Tax Credit (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), provided filing is completed by March 31, 2025.
C. Compliance Streamlining
- Track and Trace Mechanism:
- Introduced via Section 148A of CGST Act, leveraging unique identification markings to prevent tax evasion.
- Online Services Taxation:
- Supplier must record the recipient’s state for accurate GST application.
- Pre-Deposit Amendments:
- Reduced pre-deposit requirement from 25% to 10% for appeals involving only penalties.
- Temporary Identification Number (TIN):
- Introduced for non-registered entities making GST payments.
D. Legal and Procedural Reforms
- Section 17(5)(d) Amendment: Retrospective replacement of “plant or machinery” with “plant and machinery” to clarify ITC eligibility.
- Input Service Distributor (ISD) Reforms: Adjusted provisions to include interstate reverse charge mechanism (RCM).
- Invoice Management System (IMS):
- Legal framework for generating GSTR-2B forms based on supplier actions.
- Mandated reconciliation of ITC with credit notes and adjusted tax liability.
E. Other Key Decisions
- Restructuring GST Compensation: Deadline extended to June 30, 2025.
- Natural Disaster Levy: A Group of Ministers will 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 recommendations aim to simplify tax compliance, address ambiguities, and promote fairness in GST application. The proposed changes, when notified through circulars and amendments, will provide legal clarity and operational efficiency for stakeholders. Key reforms such as rate reductions, ITC clarifications, and voucher taxability align with the government’s objectives to support trade, mitigate disputes, and streamline administrative processes.