Key Updates from the 55th GST Council Meeting: Rate Changes, Exemptions, and Clarifications

What are the Highlights from the 55th GST Council Meeting?

The 55th GST Council meeting, chaired by FM Nirmala Sitharaman, brought about several key changes and clarifications, impacting various sectors and consumers. Here are some of the highlights:

• The meeting clarified that caramel popcorn will continue to be taxed at 18%, while pre-packaged and flavored popcorn will attract a lower rate of 12%.
• Recognizing the importance of fortified rice in addressing nutritional deficiencies, the council reduced the GST rate on fortified rice kernels from 18% to 5%.
• To promote the adoption of newer, more efficient vehicles, the council increased the GST rate on the sale of all old and used vehicles (except those already taxed at 18%) from 12% to 18%.
• Recognizing the critical role of gene therapy in treating life-threatening diseases, the council exempted gene therapy from GST.
• The council proposed several legislative amendments aimed at streamlining compliance and aiding economically weaker sections. These include:
  • Reversing the Supreme Court's decision on ITC for construction of immovable property.
  • Excluding composition taxpayers from the liability to pay GST under reverse charge on renting of immovable property received from an unregistered person.
  • Reducing pre-deposit for filing appeals before the Appellate Authority and the Appellate Tribunal from 25% to 10%.
  • Clarifying that no GST is payable on 'penal charges' levied by banks and NBFCs for non-compliance with loan terms.

These are just some of the key highlights from the 55th GST Council meeting. The meeting also addressed various other issues, including clarifications on contentious matters and measures aimed at trade facilitation.

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List of Goods and Services with Revised GST Rates

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Clarifications and waivers by the GST Council

The GST Council has recommended the following amendments to the CGST Act, 2017 and CGST Rules, 2017, along with clarifications and waivers:

Invoice Management System (IMS) Functionality:

• Amendments to Section 38 of the CGST Act and Rule 60 of the CGST Rules will establish a legal framework for generating FORM GSTR-2B based on taxpayer actions within the IMS.
• Section 34(2) of the CGST Act will be amended to explicitly require recipients to reverse input tax credit attributable to credit notes, eventually allowing suppliers to reduce their output tax liability.
• A new Rule 67B will be added to the CGST Rules to detail how suppliers' output tax liability will be adjusted against issued credit notes.
• Amendments to Section 39(1) of the CGST Act and Rule 61 of the CGST Rules will mandate that FORM GSTR-3B can only be filed after FORM GSTR-2B for the same tax period is available on the portal.

Late Fees for GSTR-9 and GSTR-9C:

• A circular will be issued clarifying the late fees applicable under Section 47(2) of the CGST Act for delayed filing of the annual return (GSTR-9) and reconciliation statement (GSTR-9C).
• A notification under Section 128 of the CGST Act will waive late fees for delayed GSTR-9C filings from 2017-18 to 2022-23. This waiver will apply to the excess late fee beyond what is due until the GSTR-9 filing date for those financial years, provided the GSTR-9C is filed by March 31, 2025.

Pre-Deposit for Appeals:

• Amendments to the proviso to Section 107(6) and a new proviso to Section 112(8) of the CGST Act will reduce the pre-deposit for appeals before the Appellate Tribunal to 10% in cases involving only penalty demands without any tax demand.

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55th GST Council Decisions: Impact on Consumers

While the 55th GST Council meeting primarily focused on clarifications and streamlining processes, some decisions will directly or indirectly impact consumers' daily lives. Here's what it means for you:

Direct Impact:

• Popcorn: The clarification on popcorn taxation is a minor but noticeable change. Pre-packaged, ready-to-eat popcorn (with salt and spices) will be taxed at 12%, while caramelized popcorn will be taxed at 18%. This might lead to slight price adjustments for these items.
• Fortified Rice Kernels: The reduction of GST on fortified rice kernels to 5% is a positive step. This could potentially make fortified rice more affordable, contributing to improved nutrition, especially for vulnerable populations.
• Used Vehicles: Increasing the GST rate on the sale of old and used vehicles (including some EVs) from 12% to 18% will likely make these vehicles more expensive for consumers. This could affect the used car market and potentially encourage people to hold onto their vehicles for longer.

Indirect Impact:

• Streamlined Processes and Clarifications: While changes to GSTR forms and appeal processes might not directly affect daily purchases, they aim to improve the overall efficiency of the GST system. This could lead to a more stable and predictable pricing environment in the long run.
• Focus on Compliance: The council's emphasis on clarifying various aspects of GST and ensuring compliance could indirectly benefit consumers by reducing instances of tax evasion and ensuring that businesses are operating complying with the GST laws.

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