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Highlights of 55th GST Council Meeting

The 55th GST Council meeting took place on December 21, 2024, in Jaisalmer, Rajasthan. It was presided over by the Union Minister for Finance and Corporate Affairs. The meeting was attended by Union Minister of State for Finance Shri Pankaj Chaudhary, the Chief Ministers of Haryana, Jammu and Kashmir, Meghalaya, and Odisha; the Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana; as well as the Finance Ministers of various States and Union Territories (with legislatures) and senior officials from the Ministry of Finance and State/UT governments.

Read here for Highlights of the 54th GST Council Meeting

Let’s understand the major changes in GST rates and provisions decided in the meeting!

GST Rate changes

Other changes

Following are the other recommendations:

1. To omit the definition of declared tariff and suitably amend the definition of specified premises (from the services rate and exemption notifications) to link it with the actual value of supply of any unit of accommodation provided by the hotel and to make the rate of GST applicable on restaurant services in such hotels, for a given financial year, dependent upon the ‘value of supply’ of units of accommodation made in the preceding financial year, i.e. 18% with ITC if the ‘value of supply’ exceeded Rs. 7,500 for any unit of accommodation in the preceding financial year, and 5% without ITC otherwise. Further, to give the 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. The above changes are to be made effective from 01.04.2025 to avoid any transition difficulties.

2. To exclude taxpayers registered under the composition levy scheme from the entry at Sr. No. 5AB introduced vide Notification No. 09/2024-CTR dated 08.10.2024 vide which renting of any commercial/ immovable property (other than residential dwelling) by an unregistered person to a registered person was brought under reverse charge mechanism. Further, to regularize the period from the date when notification No. 09/2024-CTR dated 08.10.2024 became effective i.e. from 10.10.2024 till the date of issuance of the proposed notification on an “as is where is” basis.

3. To increase the GST rate from 12% to 18 % on the 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.[Note: GST is applicable only on the Value that represents the Margin of the Supplier, that is, the difference between the Purchase price and Selling price (depreciated value if depreciation is claimed) and not on the value of the vehicle. Also, it is not applicable in the case of unregistered persons.]

4. To amend the definition of ‘pre-packaged and labeled’ to cover all commodities that are intended for retail sale and containing not more than 25 kg or 25 litre, which are ‘pre-packed’ as defined under the Legal Metrology Act, or a label affixed thereto is required to bear the declarations under the provisions of the Act and rules.

5. To clarify that ready-to-eat popcorn which is mixed with salt and spices is classifiable under HS 2106 90 99 and attracts 5% GST if supplied as other than pre-packaged and labeled and 12% GST if supplied as pre-packaged and labeled. However, when popcorn is mixed with sugar thereby changing its character to sugar confectionary (eg caramel popcorn), it would be classifiable under HS 1704 90 90 and attract 18% GST. It has been decided to regularise the issues for the past on an “as is where is” basis.

6. To clarify the Explanation in Sl. No. 52B in notification No. 1/2017- Compensation Cess (Rate) dated 28.6.2017 regarding ground clearance is applicable with effect from 26.07.2023.

7. To clarify 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 that do not involve settlement of funds.

8. The GST Council recommended that no proportional reversal of ITC under section 17 (1) or section 17 (2) of CGST Act, 2017 is required to be made by the ECO in respect of supplies for which they are required to pay tax under section 9(5) of CGST Act, 2017.

9. To clarify through a circular that the late fee under Section 47(2) of the CGST Act, 2017 is leviable for the delay in filing the complete annual return under Section 44 of the CGST Act, 2017, which includes both FORM GSTR-9 (Annual Return) and FORM GSTR-9C (Reconciliation Statement), where applicable.

10. For the annual returns pertaining to the period 2017-18 to 2022-23, the GST Council also recommended issuing notification under section 128 of CGST Act, 2017 for waiver of the amount of late fee for delayed filing of FORM GSTR-9C, which is in excess of the amount of late fee payable till the date of filing of FORM GSTR-9 for the said financial years, provided the said FORM GSTR-9C is filed on or before 31^stMarch 2025.

Measures for streamlining compliance in GST

1. Insertion of new provision for Track and Trace Mechanism

To insert an enabling provision in CGST Act, 2017 through Section 148A so as to empower the Government to enforce the Track and Trace Mechanism for specified evasion-prone commodities.
The system shall be based on a Unique Identification Marking which shall be affixed on the said goods or the packages thereof. This will provide a legal framework for developing such a system and will help in the implementation of a mechanism for tracing specified commodities throughout the supply chain.

2. Clarification regarding the recording of correct details of the name of the State of the un-registered recipient as well as a correct declaration of the place of supply in respect of supply of 'Online Services’

To clarify that in respect of the supply of ‘Online Services’ such as the supply of online money gaming, OIDAR services, etc. to unregistered recipients, the supplier is required to mandatorily record the name of the State of the unregistered recipient on the tax invoice and such name of State of the recipient shall be deemed to be the address on record of the recipient for the purpose of section 12(2)(b) of IGST Act, 2017 read with proviso to rule 46(f) of CGST Rules, 2017.

3. Amendment in section 17(5)(d) of CGST Act, 2017

To align the provisions of section 17(5)(d) of CGST Act, 2017 with the intent of the said section, the Council has recommended amending section 17(5)(d) of CGST Act, 2017, to replace the phrase "plant or machinery" with "plant and machinery", retrospectively, with effect from 01.07.2017, so that the said phrase may be interpreted as per the Explanation at the end of section 17 of CGST Act, 2017.

4. Pre-deposit for filing an appeal

To amend the proviso to section 107(6) of CGST Act, 2017 providing for payment of pre-deposit at 10% instead of 25% for filing appeals before Appellate Authority in cases involving only demand of penalty without involving the demand of tax.

To insert a new proviso to section 112(8) of CGST Act, 2017 providing for payment of pre-deposit at10%for filing appeals before Appellate Tribunal in cases involving only demand of penalty without involving the demand of tax.

5. Definitions of Local Fund and Municipal Fund

To amend clause (c) of section 2(69) of CGST Act, 2017 and to insert an Explanation under the same to provide for definitions of the terms ‘Local Fund’ and ‘Municipal Fund’ used in the said clause.

6. Input Services Distributor (ISD) mechanism

To amend Section 2(61) and Section 20(1) of the CGST Act, 2017 to explicitly include inter-state RCM transactions under the ISD mechanism by including reference to supplies subject to tax under section 5(3) and 5(4) of IGST Act, 2017 in the said provisions.

Consequentially, to amend section 20(2) of the CGST Act, 2017, and rule 39(1A) of the CGST Rules, 2017.

These, amendments in CGST Act, 2017 are to be made effective from 01.04.2025.

7. Provision for grant of Temporary Identification Number by Tax Officers to persons, not liable to be registered otherwise

To insert new rule 16A in CGST Rules, 2017 to provide for a separate provision for the generation of temporary identification numbers for persons, who are not liable to be registered underthe CGST Act, 2017 but are required to make any payment as per rule 87(4) of CGST Rules, 2017.

To amend Rule 87 (4) of CGST Rules, 2017 incorporating a reference to the new Rule and consequential modification of FORM GST REG-12.

8. Composition levy

To amend sub-rule (1) of rule 19 of CGST Rules, 2017 to include reference to FORM GST CMP-02 in the said rule to allow the taxpayers to modify their “category of registered person” in Table 5 of FORM GST CMP-02throughFORM GST REG-14.

9. Amendment in CGST Act, 2017 and CGST Rules, 2017 in respect of functionality of Invoice Management System (IMS)

The GST Council recommended inter-alia-

To amend section 38 of CGST Act, 2017, and rule 60 of CGST Rules, 2017 to provide a legal framework in respect of the generation of FORM GSTR-2B based on the action taken by the taxpayers on the Invoice Management System (IMS).
To amend section 34(2) of CGST Act, 2017, to specifically provide for the requirement of reversal of input tax credit as is attributable to a credit note, by the recipient, to enable the reduction of output tax liability of the supplier.
To insert a new rule 67B in CGST Rules, 2017, to prescribe the manner in which the output tax liability of the supplier shall be adjusted against the credit note issued by him.
To amend section 39 (1) of CGST Act, 2017 and rule 61 of CGST Rules, 2017 to provide that FORM GSTR-3B of a tax period shall be allowed to be filed only after FORM GSTR-2B of the said tax period is made available on the portal.

Conclusion

The 55th GST Council meeting introduced several impactful decisions aimed at simplifying GST compliance, addressing rate rationalization, and providing clarity on various provisions. The council's recommendations reflect its commitment to fostering economic growth, easing the compliance burden for taxpayers, and ensuring equitable taxation. With measures such as GST exemptions for critical goods and services, rate adjustments, and streamlined procedural changes, the decisions are expected to enhance the efficiency of the GST framework. As these changes come into effect, they promise to benefit businesses and consumers alike while strengthening India’s tax ecosystem.

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