The 55th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman, was held on December 21, 2024, in Jaisalmer, Rajasthan. The Council meeting proposed numerous transformative inclusions and changes on the applicability of Goods and Services Tax ( GST ) on the service sector.
One of the significant outcomes was the introduction of a Forward Charge Mechanism on sponsorship services provided by corporate entities. The introduction of such Forward Charge Mechanism shifts GST liability from the recipient to the service provider, effectively reducing compliance burdens for businesses availing such services.
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The Council, chaired by the Union Minister for Finance further approved a GST exemption for contributions made by general insurance companies to the Motor Vehicle Accident Fund. This fund is a noteworthy public welfare initiative aimed at compensating and providing cashless treatment to road accident victims, including those harmed by hit-and-run cases.
In the hospitality sector, a significant reform involved the removal of the “declared tariff” definition along with an update to the criteria for “specified premises.” Effective April 1, 2025, GST rates on hotel accommodations will be tied to actual transaction values from the preceding financial year. If the supply value exceeds ₹7,500, a rate of 18% with Input Tax Credit ( ITC ) shall be applicable, else, a 5% GST without ITC will be levied. Hotels have the liberty to opt for the 18% rate with ITC by submitting an annual declaration.
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For simplicity in compliance, taxpayers registered under the composition levy scheme have been excluded from the reverse charge mechanism on renting of commercial or immovable property. The period from October 10, 2024, until the issuance of the new notification is to be regularized on an “as is where is” basis.
Other dignitaries in attendance during the 55th iteration of the GST Council Meeting, was Union Minister of State for Finance Shri Pankaj Chaudhary, Revenue Secretary Ajay Seth and Chief Ministers and Deputy Chief Ministers from several states.
These measures proposed during the meeting reflect a concerted effort by the GST Council to simplify compliance, align taxation with industry practices, and address sector-specific concerns. The hospitality and insurance sectors are poised to benefit from these reforms, which enhance fairness and support public welfare. Businesses are expected to update their systems to adapt to the new framework as the changes take effect in 2024 and 2025.
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