The 55th GST Council meeting, held on December 21, 2024, in Jaisalmer, Rajasthan, introduced several important updates. Union Finance Minister Smt. Nirmala Sitharaman led the session, accompanied by state finance ministers and senior officials. Together, they focused on making GST compliance easier, revising tax rates, and resolving ambiguities.
Let’s dive into the significant decisions made during this session.
1. Key GST Rate Updates for Goods
- Fortified Rice Kernel (FRK): The GST Council reduced the GST rate on FRK to 5%, making fortified rice more affordable and accessible.
- Gene Therapy: To enhance access to advanced healthcare, the Council exempted gene therapy from GST.
- Defense and Atomic Energy Imports: Defense systems, including LRSAM components, and atomic energy-related tools now enjoy IGST exemptions.
- Food for Welfare Programs: Inputs used in food preparation for government welfare programs will continue to attract a concessional 5% GST rate.
- Used Vehicles: An 18% GST rate applies to certain used petrol and diesel vehicles, but only on the supplier’s profit margin.
- Other Goods:Pepper and raisins supplied by agriculturists remain GST-exempt.Salted popcorn attracts 5% GST, while caramelized popcorn is taxed at 18%.
2. GST Rate Updates for Services
- Insurance Contributions: Contributions to the Motor Vehicle Accident Fund are now GST-exempt, benefiting accident victims, including those in hit-and-run cases.
- Hospitality Sector: Hotels can now choose between:Paying 18% GST with ITC (Input Tax Credit)Paying 5% GST without ITC
3. Simplified Rules for Vouchers and Charges
- Vouchers: The Council clarified that voucher transactions are no longer categorized as goods or services, reducing confusion. However, related services like marketing and customization remain taxable.
- Penal Charges: Borrowers are exempt from GST on charges imposed by banks or NBFCs for violating loan terms.
4. Measures to Support Trade
- Track and Trace Mechanism: The Council introduced a system to monitor specific goods using unique identification marks, aimed at reducing tax evasion.
- Special Economic Zones (SEZ): Supplies warehoused in SEZs will not be considered goods or services until they are cleared.
5. Steps to Simplify Compliance
- Lower Pre-Deposits: Businesses filing appeals for penalties will now pay only 10% of the disputed amount instead of 25%.
- Late Fee Waivers: Late fees are waived for annual returns from FY 2017-18 to 2022-23 if businesses file them by March 31, 2025.
- Invoice Management: New systems will streamline input-output tax reconciliation, ensuring smoother compliance.
6. Key Legal and Structural Changes
- Local and Municipal Funds: The Council added clear definitions to the CGST Act for better understanding.
- Temporary Identification Numbers: Unregistered entities can now make GST payments using temporary identification numbers.
- Composition Levy: Taxpayers in the composition scheme can update their registration categories more easily.
- Invoice Management System (IMS): The Council introduced new rules to enhance invoice reconciliation using IMS tools.
7. Future Reforms and Policies
- Extended Timelines: The Council extended deadlines for resolving IGST settlements and restructuring GST compensation until June 30, 2025.
- Natural Disaster Levy Policy: A dedicated committee will draft a uniform levy policy to address natural disasters.
Conclusion
The 55th GST Council meeting made several critical decisions to simplify GST compliance and improve transparency. These updates are expected to support businesses, reduce disputes, and enhance the overall efficiency of the GST system.
For further details, refer to the official press release.
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