Key Highlights of the 55th GST Council Meeting

Key Highlights Of The 55th GST Council Meeting

The 55th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, was held on Saturday in Jaisalmer, Rajasthan. The meeting, attended by senior officials and representatives from states and union territories, saw several significant decisions aimed at revising tax rates, facilitating trade, and streamlining compliance under the Goods and Services Tax (GST) framework.

Major Tax Rate Changes and Exemptions

• Fortified Rice Kernel (FRK): The GST rate has been reduced to 5%.
• Used Vehicles and EVs: The GST rate on the sale of all old and used vehicles, including electric vehicles (EVs), has been increased from 12% to 18%. However, Finance Minister Sitharaman clarified that the 18% GST would apply only to the margin—the difference between the purchase price and selling price (or depreciated value if depreciation is claimed).
• Gene Therapy: A full GST exemption has been granted for gene therapy treatments.
• Caramelised Popcorn: The GST rate has been increased from 5% to 18%. Sitharaman explained that popcorn mixed with sugar changes its character to sugar confectionery, warranting the higher rate.
• Inputs for Free Food Distribution Programs: The concessional 5% GST rate has been extended for food inputs used in preparations intended for free distribution to economically weaker sections under government programs.
• Compensation Cess: The cess rate on supplies to merchant exporters has been reduced to 0.1%, aligning it with the GST rate on such supplies.
  “On a positive note, long standing request of the industry to provide concessional rate of 0.1% on compensation cess in case of merchant exports has been attended to. The step is much appreciated as it will help in reduction in working capital blockage” said Shivam Mehta, Executive Partner, Lakshmikumaran & Sridharan Attorneys

Clarifications on Key Issues

• Penal Charges by Banks/NBFCs: Penal charges levied on borrowers for non-compliance with loan terms will not attract GST.
  “The decisions relating to clarification on non-levy of GST on penal charges collected by banks/NBFC from borrowers for non-completion of terms, exemption to payment aggregators for value less than Rs. 2000 are a welcome move for industry and public at large.” says Shivam Mehta, Executive Partner, Lakshmikumaran & Sridharan Attorneys
• Vouchers: Transactions involving vouchers will not be treated as a supply of goods or services. However, commissions or fees charged by agents for distributing vouchers on a principal-to-agent basis will be subject to GST.

Retrospective Amendment to CGST Act

The government has decided to overturn the Supreme Court’s decision in the Safari Retreats case, which allowed commercial real estate companies to claim Input Tax Credit (ITC) on construction costs for rental buildings. The Council has proposed a retrospective amendment to Section 17(5)(d) of the CGST Act, 2017, replacing the phrase “plant or machinery” with “plant and machinery” from July 1, 2017. The CBIC Chairman clarified that the earlier phrase was a drafting error, and the amendment aims to correct this.

“The amendment will have a huge impact on the assesses who were benefitted from the said decision,” says Shivam Mehta, Executive Partner, Lakshmikumaran & Sridharan Attorneys.