GST Council Meeting Brings Changes in Tax Rates: What’s Cheaper and Costlier Now?
The 55th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, convened on December 21, 2024, in Jaisalmer, Rajasthan. Significant decisions were made to revise tax rates, simplify compliance procedures, and reduce financial burdens in certain areas. Key highlights of the meeting included tax rate reductions on specific goods and services, exemptions for crucial sectors, and clarifications on tax applicability in various scenarios.
One notable decision was the reduction of GST on Fortified Rice Kernel (FRK), classified under HS Code 1904, to 5%. This measure aims to enhance the affordability and accessibility of FRK, a nutritional food product. Similarly, the Council granted a complete GST exemption for gene therapy, acknowledging its importance in advanced medical treatments and the need to make such therapies more accessible to those in need.
Additionally, contributions made by general insurance companies from third-party motor vehicle premiums to the Motor Vehicle Accident Fund will now be exempt from GST. This decision is expected to streamline the collection and utilization of these funds. Another clarification pertained to transactions involving vouchers, which will no longer attract GST as they do not constitute the supply of goods or services. The Council also addressed penal charges levied by banks and Non-Banking Financial Companies (NBFCs) for non-compliance with loan terms, clarifying that these charges are not subject to GST.
The Council proposed several other significant changes to ease the tax burden. A reduction in the pre-deposit requirement for appeals related to penalty-only cases was recommended. This move is intended to make the appeals process more accessible for taxpayers. Furthermore, the GST rate on old and used vehicles, including electric vehicles, was increased from 12% to 18%, except for certain specified vehicles.
In the area of international cooperation, exemptions were extended to systems, sub-systems, and equipment required for the assembly of the Long Range Surface-to-Air Missile (LRSAM) system. Similarly, equipment and consumable samples imported by the International Atomic Energy Agency (IAEA) inspection teams were granted IGST exemptions under specific conditions.
Clarifications were also issued on the classification of goods and tax applicability. Autoclaved Aerated Concrete (ACC) blocks containing more than 50% fly ash content were clarified to attract 12% GST. Meanwhile, agricultural produce such as fresh or dried pepper and raisins supplied by agriculturists will remain exempt from GST.
Regarding pre-packaged goods, the definition was amended to include retail commodities not exceeding 25 kilograms or liters. Another clarification specified that ready-to-eat popcorn mixed with salt and spices would attract 5% GST if sold unpackaged and 12% GST if pre-packaged.
Hotel services also saw adjustments, with the Council amending definitions to link the applicable tax rate to the actual value of the accommodation. Additionally, taxpayers registered under the composition levy scheme were excluded from certain GST entries related to renting commercial properties.
The Council’s focus on government welfare programs was evident in its decision to maintain a concessional 5% GST rate for food preparations supplied for free distribution to economically weaker sections. This initiative underscores the commitment to ensuring affordability in essential food supplies under government schemes.
Overall, these changes reflect the Council’s efforts to create a more taxpayer-friendly environment while addressing critical areas such as health, welfare, and trade facilitation. By reducing tax burdens in targeted sectors and clarifying tax policies, the Council aims to foster economic growth and improve accessibility to essential goods and services.
This meeting marks a significant step in refining India’s GST framework, with the intent to simplify compliance, encourage transparency, and ensure equitable tax practices across various sectors. The decisions made are expected to have far-reaching impacts on both consumers and businesses, aligning with the broader goals of economic stability and inclusivity.