The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, was held on December 21, 2024, in Jaisalmer, Rajasthan. This meeting brought forward a host of key recommendations aimed at altering the tax structure of various goods and services. These decisions are set to influence the affordability of items and services while focusing on easing tax compliance for businesses and individuals alike. Below, we explore the major highlights and implications of the decisions made during the meeting.
Goods and Services Becoming Cheaper
1. Fortified Rice Kernel (FRK)
In an effort to promote better nutrition among the population, the GST rate on Fortified Rice Kernel (FRK) has been significantly reduced from 18% to 5%. This reduction is expected to make fortified rice more affordable and accessible, particularly for economically weaker sections. Fortified rice, which is enriched with essential nutrients, plays a crucial role in addressing malnutrition and supporting public health initiatives.
2. IGST Exemption on Donated Goods
To support humanitarian and relief efforts, the council has exempted goods donated to the Red Cross from Integrated GST (IGST). This move is expected to encourage charitable contributions and enhance the efficiency of disaster relief operations. With lower costs for such donations, organizations can now focus on reaching a larger number of beneficiaries during emergencies.
Goods and Services Becoming Costlier
1. Motorcycles with Engine Capacity Over 350cc
High-end motorcycles with engine capacities exceeding 350cc will now attract a higher compensation cess, which has been increased from 3% to 5%. This decision is likely to raise the prices of premium motorcycles, which are often considered luxury items. Enthusiasts and consumers in this segment will need to shell out more, potentially impacting the sales of such vehicles.
2. Online Gaming and Casinos
The GST rate on online gaming and casino services has seen a substantial hike, from 18% to 28%. This steep increase is aimed at curbing excessive participation in gambling-related activities while also boosting revenue for the government. However, this decision has sparked debates, with stakeholders in the online gaming industry expressing concerns over its impact on the growth of the sector.
Other Key Recommendations
Simplified Tax Compliance
The GST Council has emphasized simplifying tax compliance procedures, especially for small and medium enterprises (SMEs). Streamlined processes are expected to reduce the administrative burden and associated costs, enabling businesses to focus more on growth and operations rather than dealing with complex tax formalities.
Support for Startups
Recognizing the importance of innovation and entrepreneurship, the council has proposed tax incentives and reliefs for startups. These measures aim to foster a favorable ecosystem for budding businesses, encouraging them to scale operations and contribute to economic growth.
Clarity on Taxation of Services
The council also deliberated on clarifying the tax treatment of certain services, ensuring uniformity and reducing ambiguity in tax laws. This is expected to help both service providers and consumers understand their tax obligations more clearly.
55th GST Council Meeting
The recommendations made during the 55th GST Council meeting underline the council’s efforts to balance revenue generation with public welfare. By lowering taxes on essential goods and providing clarity on tax compliance, the council aims to stimulate economic growth and ensure equitable tax distribution. As these changes come into effect, both consumers and businesses must stay informed and prepared to navigate the evolving tax landscape.
