Tax Updates at a Glance
The GST Council has recommended several changes to tax rates and exemptions to simplify compliance, provide relief to individuals, and support trade.
GST Rate Reductions and Exemptions
- Fortified Rice Kernel (FRK): GST reduced to 5% (HS Code: 1904).
- Gene Therapy: Fully exempt from GST.
- Third-Party Motor Vehicle Insurance: GST exempted on contributions made by general insurance companies to the Motor Vehicle Accident Fund.
- Vouchers: No GST on voucher transactions as they are neither goods nor services. The related provisions will be simplified.
- Penal Charges: No GST on penal charges levied by banks and NBFCs for non-compliance with loan terms.
- Appeal Pre-Deposit: Reduction in pre-deposit required for filing an appeal in cases involving only penalties.
Changes in GST Rates on Goods
- IGST Exemption: Extended to LRSAM system components under Notification 19/2019-Customs.
- Compensation Cess Reduction: Reduced to 0.1% for supplies to merchant exporters, aligning with the GST rate on such supplies.
- IAEA Equipment Imports: Exempted from IGST for inspection teams, subject to conditions.
- Food for Government Programs: Concessional 5% GST on food ingredients used for free distribution to economically weaker sections.
Changes in GST on Services
- Sponsorship Services: Brought under the Forward Charge Mechanism.
- Hotel Tariff Definition Update: GST on restaurant services in hotels will depend on actual supply value, effective from 1st April 2025. Hotels can opt for 18% with ITC or 5% without ITC.
- Commercial Property Renting: Exemption for composition scheme taxpayers from the reverse charge mechanism for commercial property rentals.
Other Notable GST Changes
- Used Vehicle Taxation:
- GST increased from 12% to 18% for all old and used vehicles (except certain specified categories).
- GST applies only to the margin (difference between purchase and selling price).
- Unregistered individuals selling used vehicles remain exempt.
- Product-Specific Clarifications:
- ACC Blocks (≥50% Fly Ash): Classified under HS 6815, taxed at 12% GST.
- Pepper & Raisins from Farmers: No GST if supplied by agriculturists.
- Pre-Packaged and Labelled Goods: Defined as retail sale packs up to 25 kg/litre, requiring legal metrology compliance.
- Popcorn GST Rates:
- 5% GST for plain salted/spiced popcorn (if not pre-packaged).
- 12% GST for pre-packaged and labelled popcorn.
- 18% GST for caramel/sugar-coated popcorn (classified under confectionery).
- Payment Aggregators & Fintech Services:
- RBI-regulated Payment Aggregators qualify for GST exemption under Notification No. 12/2017.
- Payment Gateways & Fintech Services without fund settlement are not exempt.
- Effective Dates & Regularisation:
- The ground clearance criteria for GST on vehicles apply from 26th July 2023.
- The clarifications aim to resolve disputes without imposing new taxes.
These updates simplify GST compliance, reduce litigation, and provide clarity to businesses and consumers.
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