What becomes cheaper and costlier after the latest GST Council meeting? Find out here

Key decisions from the 55th GST Council meeting

The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman in Jaisalmer, Rajasthan, on December 21, 2024, introduced several important changes to the Goods and Services Tax (GST) system. The Council made decisions impacting the prices of various goods and services, some of which will become more expensive while others will see a reduction in tax rates. Here’s a detailed breakdown of the outcomes:

What becomes more expensive?

Used cars, including used electric vehicles (EVs)

To encourage the sale of new electric vehicles, the GST Council decided to raise the tax rate on used cars, including used EVs, from 12% to 18%.

• This increased tax rate applies only to used cars sold by businesses.
• Private individuals can still sell used cars without attracting GST.

Caramelized Popcorn

Caramelized popcorn will continue to attract an 18% GST.

• In contrast, ready-to-eat popcorn mixed with salt and spices, having the essential characteristics of namkeens, will remain subject to a 5% GST, provided it is not pre-packaged and labeled.
• Pre-packaged and labeled ready-to-eat snacks, including popcorn, will attract a 12% GST.

What becomes cheaper?

Gene therapy and IGST exemption

• The GST Council has completely exempted gene therapy from GST, which will help reduce costs in the healthcare sector.
• The exemption on Integrated Goods and Services Tax (IGST) for surface-to-air missiles has been extended as well.

Fortified rice kernels, AAC blocks, raisins, and pepper

• Fortified rice kernels: The GST rate on fortified rice kernels, which are used in public distribution systems, has been reduced from 18% to 5%.
• AAC blocks: Autoclaved Aerated Concrete (AAC) blocks, containing 50% fly ash, will now attract a 12% GST rate.
• Raisins and Black Pepper: Both black pepper and raisins supplied directly by farmers will be exempt from GST.

Bank penal charges

No GST will be levied on penal charges imposed by banks and non-banking financial companies (NBFCs) on borrowers who fail to meet loan terms.

Payment aggregators

• Payment aggregators handling transactions of less than Rs.2,000 will now be exempt from GST. However, this exemption does not apply to payment gateways or fintech companies.

Compensation cess

• The compensation cess rate has been reduced to 0.1% on supplies made to merchant exporters, aligning it with the GST rate applicable to such supplies.

Registration for small companies

• The GST Council has approved amendments to the GST Acts aimed at simplifying the registration process for small companies. A concept note on this proposal has received in-principle approval.

Decisions deferred

Aviation Turbine Fuel (ATF)

• A proposal to bring aviation turbine fuel (ATF) under the GST regime was deferred after several states raised concerns about revenue loss.
• ATF continues to remain outside the ‘one-nation-one-tax’ regime for now.

Floor Space Index (FSI) Taxation

• The GST Council could not reach a consensus on the taxation of the Floor Space Index (FSI) and decided to defer the decision for further discussions.

Calamity cess

• The Council decided to set up a Group of Ministers (GoM) to examine whether states can levy a special calamity cess under GST to raise funds during natural disasters.
• This proposal is in line with the GST law, which allows special taxes to be imposed for a specified period in times of calamity.

Quick commerce, e-commerce, and food delivery charges

• The decision to impose GST on quick commerce services, e-commerce, and food delivery platforms has been postponed. The Council has not reached a final decision on this matter.

Health insurance premiums

• The GST Council has deferred a decision on reducing the GST rate on health and life insurance premiums. This includes pending discussions on exempting term life insurance premiums and premiums for senior citizens’ health insurance.
• At present, the GST rate on life and medical insurance premiums is 18%.

Rate rationalization

• The proposal to rationalize GST rates on 148 items is still under review. The Group of Ministers will be given more time to finalize their recommendations.

The 55th GST Council meeting has brought several crucial changes, particularly impacting the taxation of products like used cars, popcorn, and healthcare services. While some items will see a reduction in tax rates, others, like used cars and caramelized popcorn, will become more expensive. A few critical decisions, including the inclusion of aviation turbine fuel under GST and the taxation of quick commerce services, have been deferred for further deliberation.

As the GST Council continues to refine the tax structure, these decisions reflect an ongoing effort to balance economic growth with consumer welfare. The next steps will include more discussions on the proposed amendments, particularly for sectors facing financial challenges and natural calamities.

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