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Highlights of the 55th GST Council Meeting: GST Rate Changes on Goods and Services
The 55th GST Council meeting brought several significant recommendations that impact GST rates and classifications on various goods and services. These changes aim to streamline taxation, resolve ambiguities, and promote equitable economic practices. Let’s explore these updates in detail.
GST Rate Changes on Goods in 55th GST Council Meet
The GST Council has made several notable changes regarding the rates and exemptions for specific goods:
1. Fortified Rice Kernel (FRK)
The GST rate on Fortified Rice Kernel (FRK), classified under HSN 1904, has been reduced to 5%. This measure may encourage nutritional enhancement programs.
2. Gene Therapy
The GST Council recommended exempting GST on gene therapy. This is a significant move, particularly for healthcare innovations.
3. LRSAM Systems
The Integrated Goods and Services Tax (IGST) exemption has been extended to cover systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, and software used in the assembly or manufacture of LRSAM systems. This falls under Notification 19/2019-Customs.
4. Merchant Exports
The Compensation Cess has been reduced to 0.1% on supplies to merchant exporters. This aligns the cess rate with the GST rate applicable on such supplies.
5. Inspection Equipment for IAEA
Imports of equipment and consumable samples by Inspection Teams of the International Atomic Energy Agency (IAEA) are now exempt from IGST, subject to specified conditions.
6. Food Preparations for Free Distribution
The concessional 5% GST rate has been extended for food inputs classified under HSN 19 or 21, supplied for food preparations intended for free distribution to economically weaker sections under government programs.
GST Rate Changes on Services in 55th GST Council Meet
The GST Council has also introduced changes to GST rates and mechanisms for various services:
1. Sponsorship Services
The supply of sponsorship services provided by body corporate will now fall under the Forward Charge Mechanism.
2. Third-Party Motor Vehicle Premiums
GST has been exempted on contributions made by general insurance companies from third-party motor vehicle premiums to the Motor Vehicle Accident Fund, which compensates victims of road accidents.
3. Restaurant Services in Hotels
Key changes were recommended for GST rates on restaurant services provided by hotels, effective April 1, 2025:
- 18% GST with Input Tax Credit (ITC): If the "value of supply" exceeds ₹7,500 for any unit of accommodation in the preceding financial year.
- 5% GST without ITC: If the value is below ₹7,500.
- Hotels can opt for 18% with ITC by declaring their choice before the financial year or upon obtaining registration.
4. Commercial Property Renting
Taxpayers registered under the composition levy scheme have been excluded from reverse charge provisions on renting of commercial property by unregistered persons to registered persons. This exclusion has been regularized retrospectively.
Other Key Clarifications and Changes
1. Used Vehicles
The GST rate on the sale of all old and used vehicles, including EVs, has been increased from 12% to 18%, with specific clarifications:- GST is applicable only on the margin of the supplier (difference between purchase and selling price or depreciated value).
- Higher rates apply to petrol vehicles (engine capacity ≥1200cc) and diesel vehicles (engine capacity ≥1500cc) exceeding 4000mm in length, including SUVs.
ACC blocks containing more than 50% fly ash will be classified under HS 6815 and attract 12% GST.
3. Agricultural Supplies
Supplies of fresh or dried pepper and raisins by agriculturists are clarified to be not liable to GST.
4. Pre-Packaged and Labeled Goods
The definition of "pre-packaged and labeled" has been amended to include retail commodities with packaging not exceeding 25 kg or 25 liters under the Legal Metrology Act.
5. Popcorn GST Classification
The GST rate on ready-to-eat popcorn depends on its preparation:
- 5% GST for popcorn mixed with salt and spices (not pre-packaged and labeled).
- 12% GST for pre-packaged and labeled popcorn.
- 18% GST for caramel or sugar-mixed popcorn classified as confectionery under HS 1704 90 90.
RBI-regulated Payment Aggregators are eligible for GST exemption under entry 34 of Notification 12/2017-CT(R). However, this does not cover payment gateways or fintech services that do not involve settlement of funds.
7. Penal Charges by Banks and NBFCs
The GST Council clarified that penal charges levied by banks and NBFCs for non-compliance with loan terms are not subject to GST.
Simplification of Provisions
The Council also proposed simplifying provisions for vouchers and clarified that transactions involving vouchers are neither supply of goods nor services. This simplification resolves longstanding ambiguity.
FAQs
1. What is the GST rate on Fortified Rice Kernel (FRK)?
The GST rate on Fortified Rice Kernel has been reduced to 5%.
2. Are popcorn rates revised in this meeting?
Yes, the GST rate varies:
- 5% for salted and spiced popcorn (not pre-packaged).
- 12% for pre-packaged and labeled popcorn.
- 18% for caramel popcorn.
3. What are the changes in GST for used vehicles?
The GST rate has increased from 12% to 18%, applicable only on the supplier’s margin (purchase price minus selling price).
4. Are agriculturist supplies exempt from GST?
Yes, supplies of pepper and raisins by agriculturists are exempt from GST.
5. What exemptions apply to healthcare services?
Gene therapy is now fully exempt from GST.
6. What is the GST Council’s clarification on penal charges by banks?
Penal charges levied by banks and NBFCs for non-compliance with loan terms are not subject to GST.
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Tags:Income Tax, GST
GST