The 55th GST Council meeting on December 21, 2024, brought significant changes to services, goods, compliance measures, and law procedures. Key recommendations include bringing corporate sponsorship under forward charge and exempting GST on certain insurance contributions for road accident victims. Hotel and restaurant GST regulations were revised to align rates with accommodation value, effective April 2025. Fortified rice kernels and food inputs for free distribution were granted reduced GST rates, while gene therapy and certain imports received exemptions. Changes to reverse charge mechanisms and GST on used vehicles were introduced, including rate increases for all used vehicles. Compliance improvements include amendments to the CGST Act for pre-deposit reduction in penalty cases, implementation of a track-and-trace mechanism, and revised invoice management system procedures. Additionally, measures to operationalize the GST Appellate Tribunal, extend IGST settlement timelines, and restructure GST compensation were proposed. Detailed rules for unregistered recipients of online services, voucher taxability, and exemptions for municipalities’ charges are under consideration.
A. SERVICES
1. Sponsorship services by body corporate to be brought under forward charge mechanism.
2. GST exemption is proposed on contributions made by general insurance companies from third-party motor vehicle premiums to the Motor Vehicle Accident Fund, established under Section 164B of the Motor Vehicles Act, 1988, to provide compensation or cashless treatment to road accident victims, including hit-and-run cases.
3. GST Regulations For Hotel/Restaurant Services –
> Amend the definition of “declared tariff” and “specified premises” to link them with the actual value of supply of any unit of accommodation provided by the hotel.
> Make the GST rate on restaurant services in hotels dependent on the value of supply of units of accommodation in the preceding financial year i.e.
i. 18% with ITC if the value of supply exceeded Rs. 7,500 for any unit of accommodation
ii. 5% without ITC otherwise
> Provide an option for hotels to pay tax on restaurant services at 18% with ITC by giving a declaration at the beginning of the financial year or upon obtaining registration
> Effective date shall be 04.2025.
4. Modification To Levy Of GST Under Reverse Charge Mechanism Related To Renting Of Commercial/Immovable Property
> Exclude taxpayers registered under the composition levy scheme from the reverse charge mechanism introduced at No. 5AB vide Notification No. 09/2024-CTR Dt. 08.10.2024
> Regularize the period from the effective date of Notification No. 09/2024-CTR i.e. 10.10.2024 until the date of issuance of the proposed notification on an “as is where is” basis.
B. Goods
5. GST on Fortified Rice Kernel classifiable under 1904 reduced to 5%.
6. Gene Therapy exempted from GST
7. IGST exemption extended to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, software meant for assembly/manufacture of LRSAM system under Notification 19/2019-Customs.
8. Compensation Cess on supplies to merchant exporters reduced to 0.1%
9. Imports of all equipment and consumable samples by Inspection Team of the International Atomic Energy Agency (IAEA) to be exempted subject to certain conditions.
10. Concessional rate of 5% GST extended on food inputs of food preparations under HSN 19 or 21 that are supplied for food preparations intended for free distribution to economically weaker sections under a government program subject to the existing conditions.
C. Other Changes To Goods & Services
11. Proposed Changes To GST Rate On The Sale Of Old And Used Vehicles:
| Category | Details |
| GST Rate Increase | GST on the sale of all old and used vehicles, including EVs, increased from 12% to 18%. |
|
18% GST Already Applicable |
Old and used petrol vehicles: Engine ≥ 1200 cc and Length ≥ 4000 mm. |
| Old and used diesel vehicles: Engine ≥ 1500 cc and Length ≥ 4000 mm. | |
| SUVs (Sport Utility Vehicles). | |
| Tax Basis | GST applies only to the supplier’s margin (selling price minus purchase price or depreciated value, if depreciation is claimed). |
| Exemption | GST is not applicable to unregistered persons. |
12. Autoclaved Aerated Concrete (ACC) blocks containing more than 50% fly ash contentwill fall under HS 6815 and attract 12% GST.
13. Pepper whether fresh green or dried pepper and raisins supplied by an agriculturist is not liable to GST.
14. “Pre-Packaged And Labeled” Definition To Be Amended:
> Amendment to the definition of “pre-packaged and labelled” to ensure that it covers all commodities intended for retail sale and containing not more than 25 kg or 25 litres.
> The commodity must fall under the definition of “pre-packaged commodity” as outlined in the Legal Metrology Act, 2009
> Labels affixed to these commodities must bear the declarations required under the provisions of the Legal Metrology Act and its rules.
15. GST Classification And Rates To Different Types Of Ready To Eat Popcorns:
| Type of Popcorn | Classification Code | GST Rate (Other than Pre-Packaged and Labelled) | GST Rate (Pre-Packaged and Labelled) |
| Ready-to-Eat Popcorn with Salt and Spices | HS 2106 90 99 | 5% | 12% |
| Caramel Popcorn (Considered a sugar confectionary) | HS 1704 90 90 | 18% | |
> Issues for the past to be regularized on an “as is where is” basis.
> Note Issued: No new tax imposition; and to be treated as a clarification to resolve disputes arising from different interpretations by field units.
16. Explanation in Sl. No. 52B in notification No. 1/2017- Compensation Cess (Rate) dated 28.6.2017 regarding ground clearance is applicable with effect from 26.07.2023.
17. RBI Regulated Payment Aggregators
> Eligible for the exemption under entry at Sl. No. 34 of Notification No. 12/2017-CT(R) dated 28.06.2017.
> They fall within the ambit of ‘acquiring bank’ as defined in the said entry.
> The exemption does not cover payment gateway (PG) services and other fintech services that do not involve the settlement of funds.
18. No GST is payable on the ‘penal charges’ levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms
D. Measures For Facilitation Trade
19. Amendment in Schedule III of CGST Act, 2017
> New Clause (aa): To be inserted in paragraph 8 of Schedule III of the CGST Act, 2017
> Effective Date: Retrospectively from 01.07.2017.
> The supply of goods warehoused in a Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) to any person before clearance for exports or to the Domestic Tariff Area (DTA) will be treated neither supply of goods nor as supply of services.
>To align transactions involving goods warehoused in SEZ/FTWZ with the existing GST provisions for transactions in Customs bonded warehouses.
20. Taxability Of Vouchers
> Omission of Relevant Sections: Sections 12(4) and 13(4) of the CGST Act, 2017, and Rule 32(6) of the CGST Rules, 2017, are proposed to be omitted.
| Clarification | Details |
| Transactions in vouchers | Treated neither as a supply of goods nor as a supply of services. |
|
Distribution of vouchers |
|
|
|
| Additional services (related to vouchers) | Services such as advertisement, co-branding, marketing, promotion, customization, technology support, customer support, etc., would be liable to GST on the amount paid for these services. |
| Unredeemed vouchers (breakage) | Not considered as supply under GST, and no GST is payable on income booked in accounts in respect of breakage. |
21. Circulars To Be Issued To Remove Ambiguity And Legal Disputes In Certain Cases
> Reversal of Input Tax Credit by electronic commerce operators in respect of supplies made under section 9(5) of CGST Act, 2017:
i. No proportional reversal of ITC under section 17(1) or section 17(2) of the CGST Act, 2017, is required to be made by electronic commerce operators (ECOs).
ii. This applies to supplies for which ECOs are required to pay tax under section 9(5) of the CGST Act, 2017.
> Availability of Input Tax Credit as per section 16(2)(b) of CGST Act, 2017 in respect of goods which have been delivered by the supplier at his (supplier’s) place of business:
i. In an Ex-Works contract, where goods are delivered by the supplier to the recipient or a transporter at the supplier’s place of business, and the property in goods transfers to the recipient at that point.
ii. The goods are considered to be “received” by the recipient under section 16(2)(b) of the CGST Act, 2017.
iii. Subject to the conditions outlined in Sections 16 and 17 of the CGST Act, 2017 the recipient may claim ITC on such goods.
> Applicability of late fee for delay in furnishing of FORM GSTR-9Cand providing waiver of late fee on delayed furnishing of FORM GSTR-9C for the period from 2017-18 to 2022-23:
| Topic | Details |
| Late Fee under Section 47(2) | Late fee is leviable for delays in filing the complete annual return under Section 44 of the CGST Act, 2017, which includes both FORM GSTR-9 (Annual Return) and FORM GSTR-9C (Reconciliation Statement), where applicable. |
|
Waiver of Late Fee |
For annual returns for the period 2017-18 to 2022-23, a notification under Section 128 of the CGST Act, 2017 will be issued. |
| This waives the amount of late fee for delayed filing of FORM GSTR-9C that is in excess of the amount payable till the date of filing of FORM GSTR-9 for the said financial years. | |
| Provided that FORM GSTR-9C is filed on or before 31 March 2025. |
E. Measures For Streamlining Compliance
22. Track & Trace Mechanism: Section 148A to be inserted into the CGST Act, 2017 to empower the government to enforce the Track and Trace Mechanism for specified evasion-prone commodities based on a Unique Identification Marking which will be affixed to the goods or their packages.
23.Recording of details regarding unregistered recipients for the supply of online services under GST:
> For the supply of ‘Online Services’ (such as online money gaming, OIDAR services, etc.) to unregistered recipients, the supplier must mandatorily record the name of the State of the unregistered recipient on the tax invoice.
>The name of the State of the recipient will be deemed to be the address on record of the recipient for the purpose of section 12(2)(b) of the IGST Act, 2017 read with proviso to rule 46(f) of the CGST Rules, 2017.
F. Measures Pertaining To Law & Procedures
24. Amendment to section 17(5)(d) of the CGST Act, 2017:
> Replaces the phrase “plant or machinery“ with “plant and machinery“ in section 17(5)(d) of the CGST Act, 2017.
> This amendment is retrospective and effective from 01.07.2017.
25. Amendments to the CGST Act, 2017 – Address pre-deposit requirements for appeals involving only penalty amounts:
> Amend Section 107(6) of the CGST Act, 2017 to reduce pre-deposit requirement from 25% to 10% for filing appeals before the Appellate Authority in cases that involve only the demand of penalty without the demand of tax.
> Insert a new proviso to Section 112(8) of the CGST Act, 2017 to require a pre-deposit of 10% for filing appeals before the Appellate Tribunal in cases that involve only the demand of penalty without the demand of tax.
26. Amendments to the Input Services Distributor (ISD) mechanism under the CGST Act, 2017 and CGST Rules, 2017:
> Amend Section 2(61) and Section 20(1) of the CGST Act, 2017 to explicitly include inter-state Reverse Charge Mechanism (RCM) transactions under the ISD mechanism by referencing supplies taxed under sections 5(3) and 5(4) of the IGST Act, 2017.
> Consequentially amend Section 20(2) of the CGST Act, 2017 and Rule 39(1A) of the CGST Rules, 2017.
> These amendments will take effect from 01.04.2025.
27. Mechanism for granting a Temporary Identification Number (TIN) to individuals not liable for registration under the CGST Act, 2017, but required to make payments:
> New Rule 16A: Establishes provisions for generating a TIN for such individuals.
> Amendment to Rule 87(4): Incorporates references to the new Rule 16A and modifies FORM GST REG-12
28. Amendment to Rule 19(1) of the CGST Rules, 2017:
> Include a reference to FORM GST CMP-02 within the rule.
> Allow taxpayers to modify their “category of registered person” in Table 5 of FORM GST CMP-02 via FORM GST REG-14.
29. Amendments to the CGST Act, 2017 and CGST Rules, 2017 regarding the functionality of the Invoice Management System (IMS):
> Amendment to Section 38 and Rule 60: Provide a legal framework for the generation of FORM GSTR-2B based on the actions taken by taxpayers on the Invoice Management System (IMS).
> Amendment to Section 34(2): Specifically provide for the requirement of reversal of input tax credit attributable to a credit note by the recipient, enabling the reduction of the supplier’s output tax liability.
> Insertion of New Rule 67B: Prescribe the manner in which the output tax liability of the supplier shall be adjusted against the credit note issued by them.
> Amendment to Section 39(1) and Rule 61: Ensure that FORM GSTR-3B of a tax period can only be filed after FORM GSTR-2B of the same tax period is made available on the portal.
F. Other Measures
30. IGST Settlement: The committee of officers suggested measures to address various issues raised by the States regarding IGST settlement and directed the committee to finalize changes by March 2025.
31. GST Appellate Tribunal (GSTAT): The Council took note of proposed procedural rules for GSTAT’s internal functioning, which will be notified after review by the Law Committee to aid in its operationalization.
32. GST Compensation Restructuring: Extended the timeline for the Group of Ministers working on this matter to June 30, 2025.
33. Issues in connection with charges collected by municipalities for granting FSI, including additional FSI, should be subject to GST on a reverse charge basis has been deferred for further examination at the request of the Central Government, as these charges pertain to municipalities or local authorities.
Note: There may be other sector specific recommendations made by the GST Council that may have not been covered in this alert. The purpose of this alert is to highlight the key recommendations of the GST Council. For the complete list of recommendations, kindly refer to the press release posted by the PIB, Government Of India.
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