55th GST Council Meeting Highlights: Key Updates and News

The 55th GST Council Meeting, held on December 21, 2024, in Jaisalmer, Rajasthan, resulted in a series of key decisions aimed at refining India’s Goods and Services Tax (GST) framework. These included changes to tax laws, rate adjustments, and new exemptions across various sectors, with a notable focus on improving tax compliance and addressing procedural gaps. 

Among the significant proposals are new regulations for tracking tax evasion-prone goods, changes in the tax treatment of second-hand vehicles, and adjustments to GST on restaurant services. This article outlines the major takeaways and clarifications from the meeting, highlighting the expected impacts on businesses and taxpayers.

Key Highlights from the 55th GST Council Meeting

The 55th GST Council meeting, held on 21st December 2024 in Jaisalmer, brought forward several important decisions aimed at improving tax compliance, addressing issues around tax exemptions, and refining GST rates. Here are the key takeaways from the meeting:

1. Improved Tax Compliance Measures:

   • A track-and-trace mechanism will be introduced for goods prone to tax evasion, enhancing monitoring and compliance.
   • Tax officers will grant temporary identification numbers to individuals who aren’t usually required to register but are engaged in taxable activities.

2. Input Service Distribution (ISD) Updates:

   • From 1st April 2025, inter-state reverse charge mechanism (RCM) transactions will be included under the ISD framework.

3. Introduction of Invoice Management Systems (IMS):

   • The legal framework for Invoice Management Systems (IMS) will be introduced, with necessary amendments to the law and rules.

4. GST Exemptions:

   • No GST will apply on transactions involving vouchers, gene therapy, or penal charges levied by banks and NBFCs.
   • Dried black pepper and raisins supplied by agriculturists will remain exempt from GST.
   • GST exemptions were provided to payment aggregators processing payments under Rs. 2,000.

5. Changes to GST Rates and Rules:

   • A new GST rate structure was approved for restaurant services in hotels, with the option for GST @ 18% with input tax credit (ITC) or 5% without ITC starting 1st April 2025.
   • The sale of used vehicles, including electric vehicles (EVs), will attract GST at 18% on the margin between purchase price and sale price, up from the current 12%.
   • GST on gift vouchers will not be applicable, as they are not considered goods or services.

6. Exemptions and Clarifications:

   • Import of equipment and consumable samples by the International Atomic Energy Agency (IAEA) for inspection will be exempt from IGST.
   • Sponsorship services provided by body corporates under a forward charge mechanism will no longer be subject to reverse charge.
   • The composition scheme will be excluded from reverse charge provisions for renting commercial immovable properties.

7. Pending Deliberations:

   • The GST Council deferred decisions on GST rates for food delivery services and the inclusion of air turbine fuel (ATF) under GST.

Related Read: GST on Food Items

Administrative and Procedural Updates from the 55th GST Council Meeting

The GST Council, in its 55th meeting, also made significant procedural decisions. It approved recommendations related to the IGST settlement and noted that the procedural rules for the internal functioning of the GST Appellate Tribunal (GSTAT) will be notified after further examination by the law panel. In addition, the timeframe for the Group of Ministers tasked with restructuring the GST compensation has been extended until 30th June 2025. Furthermore, a new Group of Ministers will be formed to recommend a uniform policy on imposing levies in the event of natural disasters or calamities, as requested by the Andhra Pradesh State Government.

What Became Cheaper and Costlier After the 55th GST Council Meeting?

The 55th GST Council Meeting held in December 2024 introduced several key changes to the GST structure. These adjustments have affected various goods and services, making some cheaper, others costlier, and providing clarifications on previously ambiguous categories. Here are the details:

Cheaper Goods and Services

1. Fortified Rice Kernels

   • Current Rate: 18%
   • New Rate: 5%
   • Impact: Costlier items like fortified rice kernels used in public distribution schemes will now be cheaper.

2. Gene Therapy to Treat Life-Threatening Diseases

   • Current Rate: Taxable
   • New Rate: Exempted
   • Impact: Life-saving gene therapies are now exempt from GST, making them more accessible.

3. Food Items for Free Distribution under Government Schemes

   • Current Rate: Higher, unclear
   • New Rate: 5%
   • Impact: Food items for distribution to weaker sections under government programs will be taxed at a lower rate, promoting easier access to nutritious food.

4. Fresh or Dried Black Pepper and Raisins by Agriculturists

   • Current Rate: 5%
   • New Rate: No GST
   • Impact: These agricultural products will now be GST-exempt when supplied by farmers.

5. Approved Skill Training Partners of NSDC

   • Current Rate: 18%
   • New Rate: Exempted
   • Impact: Skill training programs by approved partners will now be GST-exempt, promoting affordable skill development.

6. Sub-Systems of Long Range Surface to Air Missile (LRSAM)

   • Current Rate: Taxable
   • New Rate: Exempted
   • Impact: These defense-related components will now be exempt from GST, aiding defense procurement.

7. Bank/NBFC Penal Charges for Loan Defaults

   • Current Rate: Taxed
   • New Rate: Exempted
   • Impact: Penal charges by banks and NBFCs for loan defaults will no longer attract GST, benefiting borrowers.

Costlier Goods and Services

1. ACC Blocks (Concrete) Containing More Than 50% Fly Ash Content

   • Current Rate: 5%
   • New Rate: 12%
   • Impact: Certain concrete blocks will now be taxed at a higher rate, making construction materials more expensive.

2. Sale of Used Electric Vehicles by Businesses After Refurbishment

   • Current Rate: 12%
   • New Rate: 18% on profit
   • Impact: Businesses selling refurbished used EVs will now face higher tax on their profits.

Clarified Goods and Services

1. Sale of Used Cars and Electric Vehicles

• Current Rate: 12%
• New Rate: 18% (Uniform Rate for Registered Sellers)
• Impact: The GST rate on the sale of used vehicles, including electric vehicles (EVs), has been increased from 12% to 18%. This uniform rate will apply to all old vehicles, including two-wheelers, three-wheelers, and small cars, sold by registered taxpayers. The tax will be levied on the margin (difference between purchase price and selling price), not the total sale value. This change primarily impacts organized used vehicle markets like Maruti True Value, Spinny and Cars24, where vehicles are bought from individuals, refurbished, and resold. While this hike will not affect individual sellers, it will lead to a cost increase for ultimate buyers.

2. Sub-systems of Long Range Surface to Air Missile (LRSAM)

• • Current Rate: Taxable
  • New Rate: Exempted
  • Impact: The tax treatment of these items has been clarified, resulting in exemption.

Key Legislative Changes Following GST Council Recommendations

The GST Council’s recommendations will also lead to amendments in the GST laws in the forthcoming Budget/Finance Bill of 2025. Some major changes include:

• Input Tax Credit (ITC): The government will amend Section 17(5)(d) of the CGST Act, 2017 to nullify the impact of the Safari Retreat judgment by the Supreme Court, making ITC on construction activities related to plant use eligible.
• Tracking & Tracing Mechanism: The GST Council approved a mechanism for tracking goods prone to tax evasion, like tobacco products. This will involve unique identification markings on goods to facilitate authentication and prevent fraud.
• Retrospective Amendment for ITC: The retrospective amendment, effective from July 1, 2017, aims to overrule the Supreme Court’s Safari Retreat case decision, introducing changes that many see as pro-revenue, though some critics view it as tax injustice.
• Hotels and Restaurants: Restaurant services in hotels will now attract 18% GST with input tax credit if the accommodation rate exceeds Rs. 7,500 per unit, otherwise, it will be taxed at 5% without ITC.

GST Council Clarifications and Recommendations

1. Amendments to CGST Act and Rules for Invoice Management System (IMS):

   • Section 38 & Rule 60 Amendment: A legal framework for the generation of FORM GSTR-2B based on taxpayer actions in the Invoice Management System (IMS) will be introduced by amending Section 38 of the CGST Act, 2017 and Rule 60 of the CGST Rules, 2017.
   • Section 34(2) Amendment: The amendment will specifically require the reversal of input tax credit attributable to a credit note by the recipient, to facilitate the reduction of output tax liability for the supplier.
   • Rule 67B Addition: A new Rule 67B will be inserted to define the procedure for adjusting the supplier’s output tax liability against credit notes.
   • Section 39(1) and Rule 61 Amendment: Filing of FORM GSTR-3B will be permitted only after FORM GSTR-2B for the relevant tax period is available on the portal.

2. Late Fee Clarification for GSTR-9 & GSTR-9C Filings:

   • The GST Council will issue a circular to clarify the late fee under Section 47(2) of the CGST Act, 2017 for delayed filings of GSTR-9 (annual return) and GSTR-9C (reconciliation statement).
   • A waiver of late fees for delayed filings of GSTR-9C for the periods 2017-18 to 2022-23 has been recommended. This benefit will apply if FORM GSTR-9C is filed on or before 31st March 2025.

3. Reduction in Pre-deposit for Appeal Filing:

   • The GST Council recommends a change to Section 107(6) and the insertion of a new provision under Section 112(8) to reduce the pre-deposit requirement to 10% for filing appeals before the Appellate Tribunal, where only the demand for penalty (not tax) is involved.

Official Press Release from the 55th GST Council Meeting

Access the full press release issued by the Finance Ministry following the press briefing on December 21, 2024.

Download 55th GST Council Meeting Press Release