Update: Summary of decisions taken in 55th GST Council meeting

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Update: Summary of decisions taken in 55th GST Council meeting

Tejasvi

@tejasvi

December 26, 2024

Public Policy

The Goods and Services Tax (GST) Council convened the 55^th council meeting on December 21, 2024. The Council's recommendations include amendments to GST law entailing rate rationalisation as well as measures for facilitation of trade and measures for streamlining compliances in GST.

The proposal to omit S. 12(4) and 13(4) from CGST Act, 2017 and rule 32(6) from CGST Rules, 2017 to resolve ambiguities in the treatment of gift vouchers is a welcome move. Further, the decision to issue clarification that transactions in vouchers shall be treated neither as a supply of goods nor as a supply of services is a positive clarification. Nasscom had been advocating on this issue for a couple of years, highlighting the challenges faced by companies. We are encouraged to see our efforts culminate into positive clarifications for the industry.

Other updates:

Exemption from GST proposed on services provided by RBI regulated Payment Aggregators in relation to settlement of an amount up to INR 2,000 in a single transaction transacted through credit card, debit card, charge card or other payment card service. Further, it is proposed to clarify that the said exemption does not cover payment gateway (PG) and other fintech services which do not involve settlement of funds.
Sponsorship services provided by body corporates proposed to be taxed under forward charge mechanism, as against existing practice of payment of GST under reverse charge.
Omitting the definition of declared tariff and amending the definition of specified premises by linking with the actual value of supply of hotel accommodation services, in excess Rs 7,500 in the previous year, making it taxable at 18% during the current financial year. Moreover, option would be provided to hoteliers wherein GST on restaurant services could either be paid at 18% with ITC or 5% without ITC by giving a declaration to that effect on or before beginning of the financial year. This is proposed to be changed from 1 April 2025.
Retrospective amendment proposed in paragraph 8 of Schedule III to the Central Goods and Services Tax Act, 2017 (CGST Act) to include a new clause, effective from 01 July 2017, to clarify that the supply of goods warehoused in Special Economic Zones or Free Trade Warehousing Zones, before clearance for export or the domestic tariff area, will neither be treated as a supply of goods nor services under GST.
No proportional reversal of ITC is required under sections 17(1)/ 17(2) of the CGST Act by ECOs for supplies taxable in their hands under section 9(5) of the CGST Act. In other words, this clarification applies to supplies where the ECO is required to pay tax on behalf of the supplier.
Retrospective amendments proposed to section 17(5)(d) of the CGST Act to replace the phrase ‘plant or machinery’ with ‘plant and machinery’ so that the said phrase may be interpreted as per the explanation to Section 17 of the CGST Act.
Amendment proposed in section 107(6) and 112(8) of the CGST Act to provide for payment of predeposit @ 10% for filing appeals before Appellate Authority and Appellate Tribunal, in cases involving only demand of penalty without involving demand of tax.
Amendment proposed in Input Service Distributor provisions to explicitly include inter-state transactions subject to reverse charge under the ISD mechanism. These amendments will be effective from 1 April 2025.
Amendment proposed to provide legal framework in respect of generation of Form GSTR-2B based on the action taken by the taxpayers on the Invoice Management System (IMS). The Council also recommends that Form GSTR-3B of a tax period shall be allowed to be filed only after generation of Form GSTR-2B of the said tax period.
Amendment proposed in Section 34(2) of CGST Act to specifically provide for requirement of reversal of ITC as is attributable to a credit note, by the recipient, to enable the reduction of output tax liability of the supplier. The Council also recommends to insert a new rule 67B in CGST Rules to prescribe the manner in which the output tax liability of the supplier shall be adjusted against the credit note issued by him.

We hope you will find the update useful. Please refer to the attached press release for update on other decisions taken by the government in 55^th GST Council meeting.

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Tejasvi