55th GST Council Meeting

The 55th meeting of India’s Goods and Services Tax (GST) Council, was held in Jaisalmer, Rajasthan, significant attention was given to addressing pressing economic issues such as food inflation, unemployment, rural job creation, and maintaining capital expenditure momentum.

Key takeaways from the 55th GST Council meeting:

• Increase in GST for used electric vehicles (EVs):The Council approved raising the GST rate on old and used electric vehicles from 12 per cent to 18 per cent.
  • This move aims to align the tax structure of used EVs with that of new EVs, which are currently taxed at 5 per cent.
• Hike in GST for small petrol and diesel cars:A decision was made to increase the GST rate on small petrol and diesel cars from 12 per cent to 18 per cent. This adjustment is intended to standardise tax rates across different vehicle categories.
• Tax relief on health and life insurance premiums:The Council granted full GST exemptions on term life insurance premiums and health insurance premiums for senior citizens. Additionally, health insurance policies with coverage up to Rs 5 lakh for other individuals will also enjoy tax relief. This measure is expected to make insurance more affordable and accessible.
• GST rate adjustments on luxury goods: To boost revenue, the Council decided to increase GST rates on luxury items such as high-end wristwatches and shoes. This change is projected to generate an additional Rs 22,000 crore annually.
• Reduction in GST on essential items:In an effort to reduce household expenses, the Council lowered GST rates on essential goods, including bicycles, exercise books, and large packs of packaged drinking water. This move is aimed at providing relief to consumers.
• GST Rate Changes
• GST Rate Reduction on Fortified Rice Kernel (FRK): The GST rate on Fortified Rice Kernel (FRK), classifiable under HSN 1904, reduced to 5% from existing GST rate of 18%.
• GST Exemption on Gene Therapy: To exempt GST on gene therapy.
• IGST Exemption on Long Range Surface to Air Missile System (LRSAM): To extend IGST exemption to systems, sub-systems, equipment, parts, sub-parts, tools, test equipment, and software meant for the assembly/manufacture of LRSAM system under Notification 19/2019- Customs.
• Compensation Cess Reduction for Merchant Exporters: Rate of compensation cess to be reduced to 0.1% on supplies to merchant exporters. Reduction recommended to bring the compensation cess rate at par with the GST rate.
• IGST  Exemption  for  International  Atomic  Energy  Agency  (IAEA)  Imports:  IGST  to  be exempted on import of all equipment and consumable samples by the inspection team of the IAEA subject to specified conditions.
• Concessional GST on Food Preparations for Government Programs: Concessional 5% GST rate to be extended to food inputs of food preparation for free distribution to economically weaker sections under government programmes subject to the existing conditions.
• Increase in GST Rate on sale of old and used vehicles: GST rate on the margin on the sale of all old and used vehicles, including electric vehicles, to be increased from 12% to 18%.
• No GST applicable on ‘penal charges’ levied by banks and s (NBFCs) for non-compliance with loan terms.
• Pepper and raisins supplied by agriculturists not to be liable to GST.
• Specific Commodity Clarifications:
  • Autoclaved Aerated Concrete Blocks (ACC):Blocks with over 50% fly ash content will attract 12% GST under HSN 6815.
  • Pepper and Raisins:Fresh or dried pepper and raisins supplied by agriculturists will not attract GST.
  • Ready-to-Eat Popcorn: Popcorn mixed with salt and spices attracts 5% GST if not pre-packaged and labelled, and 12% GST if it is pre-packaged. Popcorn mixed with sugar (e.g., caramel popcorn) falls under confectionery (HSN 1704) and attracts 18% GST.
• Pre-Packaged and Labelled Goods: The definition has been revised to include all commodities intended for retail sale, containing up to 25 kg or 25 litres, and bearing labels under the Legal Metrology Act.