Context:
Recently, the 55th GST Council meeting was held under the Chairpersonship of the Union Minister for Finance & Corporate Affairs in Jaisalmer, Rajasthan.
Key Recommendations
The 55th meeting introduced several important changes aimed at simplifying tax structures, enhancing GST compliance, and fostering trade facilitation.
Changes in GST Rates on Goods
- Fortified Rice Kernel (FRK): GST rate reduced to 5%.
- Gene Therapy: GST fully exempted.
- Defense Systems: IGST exemption extended to specific components of the LRSAM system.
- Merchant Exports: Compensation Cess reduced to 0.1% for certain supplies.
- International Atomic Energy Agency (IAEA): IGST exempted for specified equipment imports by the inspection team.
Changes in GST Rates for Services
- Sponsorship by Corporates: Brought under the Forward Charge Mechanism.
- Motor Vehicle Accident Fund: GST exemption granted on contributions by general insurance companies.
- Hotel and Restaurant Services: New definitions and conditions introduced for applying GST rates, effective April 1, 2025.
Facilitation of Trade
- An amendment to Schedule III of the CGST Act, 2017, now states that the supply of goods warehoused in SEZ or FTWZ to any person before export or clearance to the Domestic Tariff Area is neither a supply of goods nor services.
Other Decisions
- Internal Functioning of GST Appellate Tribunal (GSTAT): Rules approved for procedural operations.
- The Council in its 49th Meeting recommended the creation of a Goods and Services Tax Appellate Tribunal (GSTAT) having the Principal Bench at New Delhi and State benches at locations as recommended by the Council based on the request of the State Governments.
- GST Compensation Restructuring: The time frame for the Group of Ministers on the restructuring of the GST Compensation extended till 30th June, 2025.
- Natural Disaster Levy: A Group of Ministers constituted to formulate a uniform policy on the imposition of levy in case of a natural disaster/calamity.
About GST Council
- The GST Council is a constitutional body established to make recommendations to the Union and State Governments on issues related to the Goods and Services Tax (GST).
- It is constituted by the President as per Article 279A (1) of the amended Constitution.
- It was formed after the passage of the 101st Constitutional Amendment Act in 2016.
Composition:
- Chairperson: Union Finance Minister
- Members: Union Minister of State in charge of Revenue or Finance, and a minister nominated by each state government.
- Quorum: A quorum of at least 50% of the total membership of the Council is required to hold meetings.
Voting Mechanism: It makes decisions through a collaborative and structured voting process where decisions require the support of both the Union and the States.
Voting Weightage:
- The Union Government’s vote has a weight of one-third of the total votes cast.
- The votes of all the State Governments combined have a weight of two-thirds of the total votes cast.
Majority Required: Decisions are taken only if they are supported by:
- At least 75% of the weighted votes of the members present and voting.
- This ensures that decisions reflect a broad consensus among both the Union and State Governments.