Key Decisions and Outcomes from the 55th GST Council Meeting
The 55th GST Council Meeting, held in Jaisalmer in December 2024, resulted in significant decisions impacting various sectors. Key outcomes included GST exemptions for small payment aggregators and penal charges by banks, along with rate reductions for fortified rice and gene therapies. The Council also clarified tax treatments for used EVs and refined GST provisions related to the Invoice Management System and appellate procedures.
The 55th Goods and Services Tax (GST) Council convened on December 21, 2024, in Jaisalmer, Rajasthan. This significant meeting was presided over by the Union Finance and Corporate Affairs Minister and included participation from the Union Minister of State for Finance, several Chief Ministers, Deputy Chief Ministers, and Finance Ministers from various states and Union Territories, alongside high-ranking officials from the Ministry of Finance.
Key Outcomes from the 55th GST Council Meeting
The GST Council made several important decisions:
- An extension was granted to the Group of Ministers (GoM) responsible for submitting reports on compensation cess, rate rationalization, and health insurance.
- Payment aggregators handling transactions under Rs.2,000 received a GST exemption. This exemption applies exclusively to payment aggregators and does not extend to payment gateways or other fintech services that do not involve fund settlements.
- The Finance Minister announced that penal charges levied by banks and Non-Banking Financial Companies (NBFCs) on borrowers for loan term non-compliance would not incur GST.
- Dried black pepper and raisins, when supplied by agriculturists, are now exempt from GST.
- Caramelized popcorn will be taxed similarly to products with added sugar, differentiating it from salted popcorn, which is classified as a savory snack and subject to 5% GST.
- Deliberations on GST rates for food items and associated delivery charges for quick commerce or food delivery applications were postponed by the GST Council.
- New electric vehicles (EVs) currently face a 5% GST. The Council clarified that no GST would apply to the sale of used EVs between individuals. However, if businesses sell refurbished used EVs, an 18% GST will be charged on the margin value (sale price minus purchase price), consistent with other used car sales.
- A recommendation was made to reduce the Compensation Cess rate to 0.1% on supplies to merchant exporters, aligning it with the GST rate on such transactions.
- All equipment and consumable samples imported by the International Atomic Energy Agency (IAEA) Inspection Team will be exempt from IGST, provided specific conditions are met.
Changes in Costs After the 55th GST Council Meeting
The recent GST Council meeting has led to revisions in tax rates, making certain goods and services cheaper or costlier, while also providing crucial clarifications.
| S.No. | Goods/Services | HSN/SAC Code | Previous Rate | Revised Rate | Impact |
|---|---|---|---|---|---|
| 1 | Fortified rice kernels | 1904 | 18% | 5% | Cheaper |
| 2 | Gene therapy for severe diseases | – | Taxable | Exempted | Cheaper |
| 3 | Food items for free distribution under government programs | 19 or 21 | Higher (unclarified) | 5% | Cheaper |
| 4 | ACC blocks (concrete) with >50% fly ash | 6815 | 5% | 12% | Costlier |
| 5 | Fresh/dried black pepper/raisins from agriculturists | 0904 | 5% | No GST | Cheaper |
| 6 | Approved skill training partners of NSDC | 9992 | 18% | Exempted | Cheaper |
| 7 | Sale of used Electric Vehicles (EV) between individuals | – | Higher (unclarified) | 5% | Clarified |
| 8 | Sale of used EV by businesses after refurbishment | – | 12% | 18% on profit margin | Clarified |
| 9 | Sub-systems of Long Range Surface to Air Missile (LRSAM) and similar software | 9023 | Taxable | Exempted | Cheaper |
| 10 | Bank/NBFC penal charges for loan defaults | – | Taxed (unclarified) | Exempted | Clarified |
Council Clarifications on GST Provisions
The GST Council issued several important clarifications:
- Amendments for Invoice Management System (IMS) Functionality:
- Changes to section 38 of the CGST Act, 2017, and rule 60 of the CGST Rules, 2017, will establish a legal framework for generating FORM GSTR-2B based on taxpayer actions within the IMS.
- Amendment to section 34(2) of the CGST Act, 2017, will explicitly require recipients to reverse input tax credit attributable to a credit note, facilitating a reduction in the supplier's output tax liability.
- A new rule 67B will be inserted into the CGST Rules, 2017, detailing how a supplier's output tax liability will be adjusted against issued credit notes.
- Amendments to section 39(1) of the CGST Act, 2017, and rule 61 of the CGST Rules, 2017, will ensure that FORM GSTR-3B for a tax period can only be filed once FORM GSTR-2B for that period is available on the portal.
- Late Fee Applicability for GSTR-9 and GSTR-9C: A circular will be issued to clarify the late fee provisions under section 47(2) of the CGST Act, 2017, for delayed annual return filings (GSTR-9) and reconciliation statements (GSTR-9C).
- Waiver of Late Fee for Delayed GSTR-9C Filings (2017-18 to 2022-23): The Council recommended a notification under section 128 of the CGST Act, 2017, to waive late fees for delayed GSTR-9C filings. This benefit will apply to reconciliation statements from 2017-18 to 2022-23, provided GSTR-9C is filed by March 31, 2025, waiving any late fee exceeding the amount payable until the GSTR-9 filing date for those financial years.
- Reduced Pre-Deposit for Appellate Authority Appeals: An amendment to the proviso of section 107(6) of the CGST Act, 2017, and a new proviso to section 112(8) will reduce the pre-deposit requirement to 10% for appeals before the Appellate Tribunal solely involving a penalty demand without a tax demand.
Official Press Release from the 55th GST Council Meeting
The complete press release issued by the Finance Ministry following the press conference on December 21, 2024, is available for download.
Pre-Meeting Expectations for the 55th GST Council Meeting
Prior to the meeting, there was considerable anticipation regarding various changes, especially after the introduction of the Invoice Management System (IMS) during the 54th GST Council Meeting. This meeting was expected to address recommendations from key Groups of Ministers concerning:
- Revisions in GST rates for tobacco products.
- GST implications for health and life insurance policies.
- Overall rate rationalization.
Additional anticipated proposals included:
Exemption on Insurance Premiums
Discussions about exempting or reducing GST rates on health and life insurance policies have been ongoing. During the previous council meeting, the Finance Minister directed a newly formed Group of Ministers (GoM) to submit its report by October 2024. Significant relief on GST for health insurance was widely anticipated.
The GoM's recommendations included:
- Exempting GST on premiums for term life insurance policies and health insurance for senior citizens.
- Proposing an exemption for GST on health insurance premiums up to Rs.5 lakhs for individuals who are not senior citizens.
- Suggesting a reduction in GST on health insurance premiums for non-senior citizens from 18% to 5%.
These measures aim to enhance insurance affordability and encourage wider adoption.
Reforms in Inverted Duty Structure
A key expectation was the reform of the inverted duty structure, where tax rates on inputs exceed those on finished products. This issue often leads to accumulated unutilized input tax credits (ITC) and liquidity challenges for businesses. The Council was expected to streamline GST rates, ensuring lower GST on raw materials compared to finished goods, thereby simplifying refund processes and improving cash flow.
Adjustments in GST Rates
The Group of Ministers (GoM) might propose a special rate of 35% (including cess) for over 148 items, such as cigarettes, tobacco, and aerated beverages. This initiative could help curb tobacco consumption and generate additional government revenue. The GoM was also expected to recommend GST rate changes for cosmetics, high-end apparel, watches, shoes, handbags, bottled water, and bicycles.
Possible Inclusion of Aviation Turbine Fuel (ATF), Petrol, and Diesel
Currently, natural gas and other petroleum products fall outside the scope of GST under Section 9 of the CGST Act. Petroleum companies have advocated for their inclusion in GST to claim Input Tax Credit, which is currently unavailable to them. The 55th GST Council meeting was set to deliberate on potentially bringing Aviation Turbine Fuel (ATF) under the GST regime.
Compensation Cess Deliberations
The implementation of GST included a compensation cess, an additional tax on specific goods and services, designed to offset revenue losses for states. Initially planned for five years from July 1, 2017, the government extended this cess on luxury and demerit goods until March 2026. At the 54th GST Council meeting, a GoM was formed to analyze data and determine the future of the cess. While this GoM might seek a three-month extension for its recommendations, the 55th GST Council meeting was expected to address the applicability of the 22% cess on utility vehicles, particularly those exceeding 1,500 cc engine capacity and certain dimensions.
Risk-Based GST Registration for Taxpayers
The government is actively working to prevent misuse of GST provisions by fraudulent taxpayers. Previously, biometric-based Aadhaar authentication and document verification were mandated to confirm applicant legitimacy. Low-risk applicants, identified through data analysis, could use OTP-based Aadhaar authentication instead of visiting a GST Suvidha Kendra (GSK) in person. The council meeting was expected to discuss categorizing registrations and extending Input Tax Credit (ITC) benefits based on a taxpayer's risk profile.
This space will be updated with further developments regarding the 55th GST Council meeting.