MM TAX CLUB

The 55th GST Council meeting, chaired by Union Finance Minister Smt. Nirmala Sitharaman, took place in Jaisalmer, Rajasthan. This meeting brought together various state Finance Ministers and officials to discuss and recommend significant changes to the Goods and Services Tax (GST) framework. Below are the key decisions and recommendations made during the meeting:

Changes in GST Rates for Goods

1. Fortified Rice Kernel (FRK): GST rate reduced to 5%.

2. Gene Therapy: Exempted from GST.

3. LRSAM Systems: IGST exemption extended to components used in assembly and manufacturing.

4. Merchant Exporters: Compensation cess reduced to 0.1% on specific supplies.

5. IAEA Inspection Team: IGST exemption on imports of equipment and consumables under specified conditions.

6. Food Preparations: Concessional 5% GST rate extended for government programs aimed at economically weaker sections.

Changes in GST Rates for Services

1. Sponsorship Services: To be brought under Forward Charge Mechanism.

2. Motor Vehicle Accident Fund: GST exemption on contributions by general insurance companies.

3. Accommodation Services: Redefined applicability of GST rates based on actual value of supply, effective from April 1, 2025.

4. Composition Levy Scheme: Exclusion of taxpayers under this scheme from reverse charge mechanism for specific rentals.

5. Old and Used Vehicles: GST rate increased from 12% to 18% for vehicles meeting certain criteria, with tax applied only to the supplier’s margin.

6. Autoclaved Aerated Concrete Blocks: GST clarified at 12% for blocks with over 50% fly ash content.

7. Agricultural Produce: Fresh green or dried pepper and raisins by agriculturists exempt from GST.

8. Pre-Packaged Commodities: Definition amended to include items under 25 kg/litre for retail sale.

9. Popcorn: Tax rates clarified based on ingredients and classification.

Trade Facilitation Measures

1. Schedule III Amendment: Explicitly excludes warehoused goods in SEZs or FTWZs from GST as supplies of goods or services.

2. Vouchers: Simplified provisions clarifying non-taxability of transactions involving vouchers, except for specific associated services.

3. Circular Clarifications: Issuance of clarifications to resolve disputes, including reversal of ITC for electronic commerce operators and eligibility for ITC in Ex-Works contracts.

Streamlining GST Compliance

1. Track and Trace Mechanism: Introduction of a Unique Identification Marking system to trace commodities throughout the supply chain.

2. Online Services: Mandatory recording of the state name of unregistered recipients in invoices.

3. Pre-Deposit for Appeals: Reduction of pre-deposit requirements to 10% for appeals involving only penalties.

4. Temporary Identification Numbers: New provisions for issuing temporary IDs to non-registered persons for specific payments.

Legal and Procedural Changes

1. Input Services Distributor (ISD): Inclusion of inter-state reverse charge mechanism transactions.

2. Invoice Management System (IMS): Enhancements to streamline filing processes and ensure accurate ITC claims.

3. Compensation for Road Accidents: Clarified that contributions to the Motor Vehicle Accident Fund are exempt from GST.

Other Decisions

1. Natural Disaster Levy: Formation of a Group of Ministers to evaluate policies for natural disaster levies.

2. Operationalizing GSTAT: Approval of procedural rules for the GST Appellate Tribunal.

3. GST Compensation: Extended timeline for the restructuring of GST compensation till June 30, 2025.

Notes:

The recommendations will be implemented through corresponding amendments, circulars, and notifications, which will have the force of law.