55th GST Council Meeting: What costs more

55th GST Council Meeting: Key Updates on Rate Changes and Policy Reforms

The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, introduced significant changes to India’s Goods and Services Tax (GST) framework. The updated measures aim to simplify tax processes, provide targeted relief, and address emerging policy needs across multiple sectors.

👉 Recommendations of the 55th Meeting of the #GSTCouncil

👉 GST Council recommends reduction in #GST rate on Fortified Rice Kernel (FRK), classifiable under 1904, to 5%

👉 GST council also recommends to fully exempt GST on #GeneTherapy

👉 GST Council recommends exemption of… pic.twitter.com/B9cV7ALp5A

— Ministry of Finance (@FinMinIndia) December 21, 2024

Items and Services Getting Cheaper

Fortified Rice Kernels (FRK)

In a move aimed at enhancing nutrition for economically weaker sections, the GST rate on FRK supplied through the Public Distribution System (PDS) has been reduced to 5%.

Gene Therapy

Advanced medical treatments have received a boost with gene therapy now fully exempt from GST, making such procedures more affordable.

Food Preparations for Free Distribution

Inputs for food preparations under government welfare schemes will attract a concessional 5% GST, reducing costs for initiatives supporting vulnerable populations.

Defense Sector Benefits

The Integrated Goods and Services Tax (IGST) has been exempted on systems, sub-systems, and tools for Long Range Surface-to-Air Missile (LRSAM) assembly, benefiting the defense industry.

International Atomic Energy Agency (IAEA) Equipment

To support global regulatory compliance, imports of inspection equipment and consumables for the IAEA will no longer attract IGST.

Pepper and Raisins Sales

Agriculturists selling pepper and raisins directly are now exempt from GST, offering clarity and relief to agricultural producers.

Items and Services Getting Costlier

Used Vehicles, Including EVs

The GST rate on old and used vehicles has been raised from 12% to 18%, excluding certain petrol and diesel variants. This is expected to impact the resale automobile market.

Ready-to-Eat Popcorn

Pre-packaged and labeled popcorn will now be taxed at 12%, while caramelized variants attract 18%. Non-packaged popcorn resembling “namkeens” will remain at 5%.

Autoclaved Aerated Concrete (ACC) Blocks

ACC blocks with over 50% fly ash content will now be taxed at 12%, potentially increasing costs in the construction sector.

Corporate Sponsorship Services

These services have been moved to the Forward Charge Mechanism, increasing the tax burden on corporate sponsors.

Policy Clarifications and Updates

Vouchers

Transactions involving vouchers have been clarified as neither goods nor services, making them exempt from GST.

Penal Charges

Banks and NBFCs collecting penalties for non-compliance with loan terms will no longer attract GST, providing relief to borrowers.

Definition of Pre-Packaged and Labelled

The updated definition now aligns with the Legal Metrology Act, covering commodities intended for retail sale in packages up to 25 kg or liters, ensuring compliance with mandatory labeling requirements.

Implications

These changes are poised to impact a range of sectors, from agriculture and healthcare to defense and retail. While reduced rates aim to make essential goods and services more affordable, increased rates align with revenue optimization strategies. Policy clarifications further enhance compliance and streamline tax administration, reflecting the Council’s commitment to balancing affordability and efficiency.

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