Key Recommendations of 55th GST Council Meeting
The GST Council met for the 55th time on December 21, 2024 in Jaisalmer and made recommendations on various matters including legislative changes, GST rates on specified goods and services, clarifications on contentious issues, measures aimed at trade facilitation. The GST Council, however, deferred several decisions like overall rate rationalisation, GST on life and health insurance premiums etc. This Alert gives an insight on the key recommendations from this meeting:
A. Legislative Changes
A1. ITC on construction of immovable
property
Ø Section 17(5)(d) of the Central Goods and Services Tax Act, 2017
(‘CGST Act’) to be amended to replace the phrase ‘plant or machinery’ with the
phrase ‘plant and machinery’ retrospectively, effective from July 1, 2017.
Resultantly, the ITC restriction under Section 17(5)(d) will also be read with
the Explanation defining ‘plant and machinery’, as provided under Section 17.
Ø This proposal comes in the light of recently pronounced Supreme
Court ruling in the case of Safari Retreats, wherein it was inter-alia held
that the phrase ‘plant and machinery’ used in Section 17(5)(c) and ‘plant or
machinery’ used in Section 17(5)(d) are different and hence, Explanation to
Section 17 cannot be made applicable to Section 17(5)(d).
A2. Taxability on vouchers
Ø Transactions in vouchers not to be considered as taxable and to be
treated neither as supply of goods or supply of services. Thus, GST to not
apply on distribution of vouchers on a principal-to-principal basis. However,
commission / fee charged by agent to be liable to GST when distribution made on
principal-to-agent basis. Unredeemed vouchers (breakage) not to be considered a
supply and no GST is payable on income booked in the accounts in respect of
vouchers.
Ø Provisions related to taxability of vouchers i.e., Sections 12(4)
and 13(4) of the CGST Act providing for time of supply and Rule 32(6) of the
Central Goods and Services Tax Rules, 2017 (‘CGST Rules’) related to valuation
of vouchers to be omitted.
A3. Pre-deposit for filing appeal
Ø Currently, a pre-deposit equal to 25% of the penalty demand is
payable for filing appeal before the Appellate Authority where an order
demanding penalty (only) is passed under Section 129(3) of the CGST Act i.e.,
detention of goods. Further, no pre-deposit required when appeal is filed
before Appellate Tribunal.
Ø Section 107(6) of the CGST Act to be amended to reduce pre-deposit
from 25% to 10% for filing appeals before the Appellate Authority. Also,
Section 112(8) of the CGST Act to be amended to provide for payment of 10%
pre-deposit for filing appeals before the Appellate Tribunal in such cases
A4. In-bond sale of goods by Special
Economic Zone (SEZ) / Free Trade Warehousing Zone (FTWZ)
Ø Similar to the treatment of supply transactions in a customs bonded
warehouse, clause (aa) to be inserted in Entry 8 of Schedule III of the CGST
Act, to include supply of goods warehoused in a SEZ or FTWZ to any person,
before clearance of such goods for export or to Domestic Tariff Area. Thereby,
treating such transactions as ‘neither supply of goods nor supply of services.
The said insertion to be effective retrospectively, from July 1, 2017.
A5. Invoice Management System (‘IMS’)
Ø Section 38 of the CGST Act and Rule 60 of the CGST Rules to be
amended to provide for generation of Form GSTR-2B basis the actions taken by
the taxpayers as per the IMS.
Ø Section 34(2) of the CGST Act to be amended to provide for the
condition of reduction of ITC by recipient on credit note issued by supplier,
for the supplier to take tax adjustment on such credit note. Rule 67B to be
inserted to provide the manner for adjusting output tax liability of supplier
against credit note.
Ø Section 39(1) and Rule 61 to be amended to permit filing of Form
GSTR-3B only after generation of Form GSTR-2B on the portal.
A6. Invoice Management System (‘IMS’)
Ø Section 38 of the CGST Act and Rule 60 of the CGST Rules to be
amended to provide for generation of Form GSTR-2B basis the actions taken by
the taxpayers as per the IMS.
Ø Section 34(2) of the CGST Act to be amended to provide for the
condition of reduction of ITC by recipient on credit note issued by supplier,
for the supplier to take tax adjustment on such credit note. Rule 67B to be
inserted to provide the manner for adjusting output tax liability of supplier
against credit note.
Ø Section 39(1) and Rule 61 to be amended to permit filing of Form
GSTR-3B only after generation of Form GSTR-2B on the portal.
A7. Other recommendations
Ø Along-with intra-state reverse charge transactions, inter-state
reverse charge transactions also to be included under ISD Mechanism effective
April 1, 2025.
Ø Section 2(69)(c) to be amended to include explanation defining the
terms ‘Local Fund’ and ‘Municipal Fund’.
Ø New Rule 16A to be inserted to provide for generation of temporary
identification number for persons, who are not liable to be registered under
CGST Act but are required to make tax payment.
Ø In respect of Form GSTR-9C for the FY 2017-18 to FY 2022-23, late
fee to be waived in excess of the late fee payable till the date of filing of
Form GSTR-9 of the respective year, provided Form GSTR-9C is filed by March 31,
2025.
Ø Definition of 'pre-packaged and labelled' amended to include all
commodities intended for retail sale, containing not more than 25 kg or 25
litres, which are 'pre-packed' and ‘labelled’ as defined under the Legal
Metrology Act 2009 and rules thereunder.
Ø Section 2(69)(c) to be amended to include explanation defining the
terms ‘Local Fund’ and ‘Municipal Fund’.
Ø New Rule 16A to be inserted to provide for generation of temporary
identification number for persons, who are not liable to be registered under
CGST Act but are required to make tax payment.
Ø In respect of Form GSTR-9C for the FY 2017-18 to FY 2022-23, late
fee to be waived in excess of the late fee payable till the date of filing of
Form GSTR-9 of the respective year, provided Form GSTR-9C is filed by March 31,
2025.
Ø Definition of 'pre-packaged and labelled' amended to include all
commodities intended for retail sale, containing not more than 25 kg or 25
litres, which are 'pre-packed' and ‘labelled’ as defined under the Legal
Metrology Act 2009 and rules thereunder.
B.
Rate Changes
B1.
Hotel accommodation and restaurant services therein
Ø The definition of ‘declared tariff’
to be removed from the relevant notifications related to services rates and
exemptions. Further, the definition of ‘specified premises’ to be amended to
link the rate of GST on accommodation units in hotels to the actual value of
the supply (vis-à-vis declared tariff as presently existing).
Ø With effect from April 1, 2025, the
GST rate on restaurant services in hotels to be depended on the ‘value of
supply’ of the accommodation provided by the hotel in the previous financial
year:
Ø 18% GST with ITC if the value of
supply of any unit of accommodation exceeded Rs. 7,500/-
Ø 5% GST without ITC if the value of
supply of any unit of accommodation equal to or below Rs. 7,500/-.
B2. Others
|
Rate
Changes |
From |
To |
|
old and
used vehicles including EVs (other than those falling under the 18% rate) |
12% |
18% |
|
Fortified
Rice Kernel (FRK) under HSN 1904 |
18% |
5% |
|
Compensation
Cess on supply to merchant exporters |
As
applicable |
0.1% |
|
Import of
all equipment and consumable samples by Inspection Team of the International
Atomic Energy Agency (IAEA) |
As
applicable |
Exempt |
|
Contributions
made by general insurance companies to the Motor Vehicle Accident Fund for
providing compensation/cashless treatment to victims of road accidents,
including hit-and-run cases |
18% |
Exempt |
C. Proposed Clarifications
1. Clarifications relating to GST rate /
exemption
Ø Autoclaved Aerated Concrete (‘ACC’) blocks containing more than 50%
fly ash content to be classified under Heading 6815 and subject to 12% GST.
Ø Ready-to-eat popcorn mixed with salt and spices are classifiable
under HSN 2106 9099 and subject to 5% GST if sold unpackaged, and 12% GST if
pre-packaged and labelled. Popcorn mixed with sugar, changing its character to
sugar confectionery (e.g., caramel popcorn), to be classified under HSN 1704
9090 and subject to 18% GST. Past practices to be regularised on ‘as is where
is’ basis.
Ø Services provided by RBI-regulated payment aggregators eligible for
exemption under Entry Sl. No. 34 of Notification No. 12/2017-Central Tax Rate
dated June 26, 2017, as they are classified as ‘acquiring banks’. However,
exemption not available to payment gateways (PG) or other fintech services that
do not facilitate the settlement of funds.
Ø Explanation regarding ‘ground clearance’ for the levy of
compensation cess on the Utility Vehicle (in terms of SI. No. 52B of
Notification No. 1/2017- Compensation Cess (Rate) dated June 28, 2017) to be
applicable from July 26, 2023.
Ø 2. Other clarifications
Ø GST not payable on the ‘penal charges’ levied and collected by banks
and NBFCs from borrowers in case of non-compliance with loan terms.
Ø E-commerce operators (ECOs) not required to reverse ITC under
Sections 17(1) / 17(2) of the CGST Act, for supplies on which they are liable
to pay tax under reverse charge under Section 9(5) of the CGST Act.
Ø Goods to be considered as ‘received’ by recipient under Section
16(2)(b) of the CGST Act, where delivery of goods is made by the supplier at
the supplier’s place of business and the property in the goods transfers to the
recipient at such location (ex-works supplies).
Ø Supplier of online services such as online money gaming, OIDAR
services, etc., to unregistered recipients, to include the name of recipient's
State on tax invoice. The said state name to be deemed as recipient's address
on record for the purposes of determining place of supply.
D. Other Measures
Ø Restructuring of the GST Compensation extended till June 30, 2025.
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