55th GST Council Meeting: Key Proposals "The decision on imposing distinct taxes for food delivery, quick commerce, and platform services has been deferred. Despite widespread speculation in the media over the past week," explained FM Sitharaman

The 55th GST Council meeting has sparked discussion following changes proposed by Finance Minister Nirmala Sitharaman during the session held in Jaisalmer, Rajasthan, on December 21st 2024. The meeting, chaired by Union Minister of State for Finance Shri Pankaj Chaudhary, has drawn significant attention across industries, with key tax reforms and exemptions affecting agriculture, healthcare, exports, electric vehicles, online food delivery, and various other sectors.

Fortified Rice Kernel: One of the most notable announcements was the reduction of GST on Fortified Rice Kernel (FRK) to five per cent. This reduction is expected to lower costs for fortified rice distributed through government food programs targeting vulnerable communities.

Gene Therapy: In the healthcare sector, gene therapy has been fully exempted from GST, a significant decision that will make advanced medical treatments more affordable and accessible to patients in need.

Defence Manufacturing: Defence manufacturing also received a boost, with the IGST exemption extended to systems, sub-systems, tools, and software involved in the production of Long Range Surface-to-Air Missiles (LRSAM), aligning with India's push for self-reliance in defence production and a big push for startups.

Exporters' Edge: Exporters welcomed the reduction of the compensation cess on supplies to merchant exporters to just 0.1 per cent, a move that will enhance the global competitiveness of Indian goods.

Nuclear Inspection: In addition, imports of nuclear inspection equipment by International Atomic Energy Agency (IAEA) teams will now be exempt from IGST, facilitating smoother international cooperation in the nuclear sector.

Significant changes were introduced for key services as well. General insurance companies will no longer pay GST on contributions made from third-party motor premiums to the Motor Vehicle Accident Fund, which provides crucial financial and medical support to road accident victims.

The hospitality sector also saw major revisions, with hotels charging room rates above INR 7,500 set to attract 18 per cent GST with input tax credit (ITC) from April 1, 2025, while rooms below this price point will continue to be taxed at 5 per cent without ITC. Hotels can choose to pay 18 per cent GST with ITC by declaring their preference at the start of the financial year. Corporate sponsorship services have been shifted to the forward charge mechanism, simplifying tax collection for businesses offering sponsorships.

6 things Finance Ministry highlighted

The ministry clarified some of the proposals due to widespread media speculation. Finance Minister Sitharaman explained that the GST on the sale of old vehicles has increased from 12 per cent to 18 per cent. However, the tax will apply only to the profit margin, benefiting second-hand car dealers by reducing the overall tax burden. Farmers received a direct benefit with the exemption of GST on fresh or dried black pepper and raisins sold by them.

Retail goods up to 25 kg or 25 litres have now been classified as "pre-packaged and labelled" under GST, providing clarity to businesses and retailers.

A widely discussed issue during the meeting was the taxation of popcorn. The ministry clarified that salted or spiced popcorn will remain taxed at 5 per cent if sold loose and 12 per cent if packaged. However, caramel popcorn will attract 18 per cent GST, as it has been classified as confectionery.

In a relief for consumers, bank penalties imposed by banks or NBFCs for late EMIs or non-compliance on loans will now be exempt from GST. Additionally, RBI-regulated payment aggregators have been exempt from GST, though fintech companies offering payment gateway services are not included in this exemption.

Regarding online food delivery tax and charges, the finance ministry said the council is yet to finalise. "The decision on imposing distinct taxes for food delivery, quick commerce, and platform services has been deferred. Despite widespread speculation in the media over the past week, with reports suggesting tax rates of 5 per cent on food delivery and 18 per cent on quick commerce, no formal decision has been made by the GST Council. I would like to clarify that no such tax structure has been finalized or approved at this stage," said FM Sitharaman.

Small businesses under the composition scheme will no longer have to deal with reverse charges when renting commercial properties to registered entities, alleviating unnecessary tax burdens and fostering growth for small traders and entrepreneurs.