55th GST Council Meeting: Key Tax Reforms Announced

The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, introduced several key reforms aimed at simplifying tax structures and reducing the financial burden in specific areas. Held in Jaisalmer, Rajasthan, the Council made significant recommendations on tax exemptions, rate reductions, and compliance improvements.

Major Recommendations:

Cheaper Goods and Services

1. Fortified Rice Kernel (FRK):
   GST rate reduced to 5% to make FRK more affordable.
2. Gene Therapy:
   Full GST exemption granted, recognizing its critical role in advanced medical treatments.
3. Government Program Food Inputs:
   Concessional 5% GST rate extended to food inputs supplied under government programs for economically weaker sections.
4. International Atomic Energy Agency (IAEA):
   IGST exemption extended to equipment and samples imported by IAEA inspection teams under specified conditions.
5. LRSAM Systems:
   IGST exemption extended for equipment and components used in the assembly of LRSAM systems under defense programs.
6. Contributions to Motor Vehicle Accident Fund:
   GST exemption granted for contributions made by insurance companies from third-party motor vehicle premiums.

Costlier Goods

1. Old and Used Vehicles:
   GST rate increased from 12% to 18%, including for electric vehicles, except for specified categories.

Clarifications on Tax Rates

1. Popcorn:
   Ready-to-eat popcorn:
   • 5% GST if non-pre-packaged.
   • 12% GST if pre-packaged and labeled.
2. Autoclaved Aerated Concrete (ACC) Blocks:
   GST rate clarified at 12% for ACC blocks containing over 50% fly ash.
3. Agriculturists:
   Supply of pepper and raisins by agriculturists clarified to be GST exempt.

Simplified Compliance and Services Updates

1. Penal Charges by Banks and NBFCs:
   Penal charges for non-compliance with loan terms are not subject to GST.
2. Hotel Services:
   Definitions of tariff and premises updated to reflect the actual supply value.
3. Sponsorship Services:
   Brought under the Forward Charge Mechanism for better clarity.
4. Pre-Deposit for Appeals:
   Pre-deposit requirements for penalty-related appeals reduced to ease taxpayer burdens.

Response and Implementation

The Council’s decisions aim to streamline GST processes, support small businesses, and reduce costs for essential goods and services. The reforms, particularly those targeting healthcare and essential commodities, have been widely welcomed for their focus on public welfare and economic growth.

The pilot implementation of these changes will soon begin, with detailed notifications expected in the coming weeks.