Recommendations of the 55th GST Council Meeting| Changes and Clarification on GST Rates

During the 55th GST Council meeting,  held on 21st December 2024 under the chairmanship of the Union Minister of Finance and Corporate Affairs, The GST Council recommended a change in the rate of GST on various Goods and Services and clarified the applicability of GST rates on various items.

Detailed discussions of recommendations made by the GST Council with respect to GST rate is as follows:

1. GOODS

1.1 Changes in GST Rates

• The GST Rate on Fortified Rice Kernel (FRK) (HSN 1904) has been proposed to be reduced from 18% to 5%.
• GST is charged @ 0.1% on supply made to merchant export, i.e., from where goods are to be further exported. GST Council has recommended to reduce rate of compensation cess to 0.1% on supplies made to merchant exporters to bring the same at par with GST rate on supplies.
• GST Council has recommended a concessional rate of 5% GST on food inputs of food preparations under HSN 19 or 21 that are supplied for food preparations intended for free distribution to economically weaker sections under a government program subject to the existing conditions.
• Increase GST from 12% to 18% on sale of all old and used vehicles, including EVs other than those specified at 18% -Sale of old and used petrol vehicles of engine capacity of 1200 cc or more & of length of 4000 mm or more; diesel vehicles of engine capacity of 1500 cc or more & of length of 4000 mm and SUVs.

Read Also: 54th GST Council Meetings| Amendments and Clarification for Facilitation of Trade

1.2 Exempt GST Rate

• GST Council has recommended to extend Custom IGST exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, software meant assembly/manufacture of LRSAM system under Notification 19/2019-Customs.
• Exempt from IGST imports of all equipment and consumable samples by the Inspection Team of the International Atomic Energy Agency (IAEA) subject to specified conditions.

1.3 Clarification on GST Rates

• Autoclaved Aerated Concrete (ACC) blocks containing more than 50% fly ash will fall under HS 6815 and attract 12% GST.
• pepper whether fresh green or dried pepper and raisins when supplied by an agriculturist is not liable to GST.
• GST on pop-corns:

2. Services

2.1 Exempt GST Rate

GST Council has recommended to exempt GST on following services:

• Gene Therapy;
• GST on the contributions made by general insurance companies from the third-party motor vehicle premiums collected by them to the Motor Vehicle Accident Fund, constituted under section 164B of the Motor Vehicles Act, 1988. This fund is constituted for providing compensation/ cashless treatment to the victims of road accidents including hit and run cases.

2.2 Clarification on GST Rate

• RBI regulated Payment Aggregators are eligible for the exemption under entry at Sl. No. 34 of notification No. 12/2017-CT(R) dated 28.06.2017 since they fall within the ambit of ‘acquiring bank’ as defined in the said entry.  To also clarify that this exemption does not cover payment gateway (PG) and other fintech services which do not involve settlement of funds.
• no GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.

3. Other Recommendations:

1. GST on Sponsorship Service under forward charge:

• GST on supply of sponsorship service by any person to the body corporate or partnership firm located in taxable territory is chargeable under reverse charge Mechanism.
• GST Council has recommended to bring supply of the sponsorship services provided by the body corporates under Forward Charge Mechanism.

2. GST to be charged based on actual value of accomodation instead of declared value

• GST Council has recommended that for the purpose of charging GST on hotel accommodation service, declared value shall no longer be considered as the basis. 
• The GST Shall be charged based on the actual value of supply of any unit of accommodation provided by the hotel.
• Further,  to make the rate of GST applicable on restaurant services in such hotels  dependent upon the ‘value of supply’ of units of accommodation made in the preceding financial year, If value of supply exceeds INR 7500 per unit of accommodation: 18% with ITC and 5% without ITC.
• Further, to give an option to pay tax on restaurant service in hotels at the rate of 18% with ITC, if the hotel so chooses, by giving a declaration to that effect on or before the beginning of the financial year or on obtaining registration.
• Such change shall be made effective from 01.04.2025 to avoid any transition difficulties.

3. Exclusion of composition dealer from GST under RCM on renting of commercial property:

• GST on renting of commercial property by unregistered person to registered person was brought under RCM with effect from 10th October, 2024.
• GST Council has recommended to exclude taxpayers registered under composition scheme from discharging GST under RCM in such cases.