The 43rd GST council meeting discussed the exemption of Covid-related products from the GST rate slabs.
Chandigarh: The exemption of Goods and Services Tax (GST) on Covid-related products was on the agenda of the GST council meeting today, but experts suspect that the exemption might not take place.
The Goods and Services Tax Council (GST) met on May 28, 2021, after a hiatus of more than six months. The 43rd GST council meeting was being chaired by Finance Minister (FM) Nirmala Sitharaman, in the presence of Minister of State (MoS) for Corporate Affairs Anurag Singh Thakur. The meeting was held via video conferencing in New Delhi. The meeting was requested by several states and union territories (UTs) due to a shortage of compensation, and tax relief for Covid-19 related goods.
The meeting also had on its agenda, exemption of GST on Covid-related products. Punjab FM Manpreet Singh Badal, in a letter to FM Sitharaman, said that GST exemption on hand sanitisers, face masks, gloves, PPE Kits, temperature scanners, oximeters, ventilators and other Covid-related products should be discussed, besides relief to sectors such as Micro, Small and Medium Enterprises (MSMEs), aviation, hotels, restaurants, entertainment, commercial reality and retail. He asked for this because life-saving items for Covid-19 had basic custom duties of up to 20 percent and GST of up to 18 percent.
At present, the vaccines have a GST of five percent and the oxygen cylinders are levied with 12 percent GST.
“The chances of these goods getting exempted from GST are not there,” said CS Sanjay Malhotra, who represented Company Secretaries in the pre-council meeting of GST. “At most, the rates would be decreased to five percent. If they bring them down to zero, then the cost of goods would go up.”
“Given the prevailing position the country finds itself in today, we need to take some urgent measures on the pandemic front. It is baffling that despite the crisis, our country currently finds itself in, with millions of people suffering consequences of Covid-19 and inadequate health infrastructure, taxes this high continue to apply on basic essentials needed to overcome this life-threatening disease,” Mr. Badal said.
“When it comes to imported vaccines, then the custom duty has to be paid,” said Dr Sumit Goklaney, assistant professor in Commerce, and taxation expert. “The more relaxations that they give to the states, the more currency notes they would have to print and eventually the economy would fall because of it.”
The states have been requesting the meeting because of other issues like rationalization of GST rate slabs, and inclusion of petroleum products in these slabs. Petroleum products have been kept out of the GST slabs because the states have been dependent on these products for their revenue generation.
“People think that the petroleum products would fall under the GST bracket of 28 percent and that would reduce the prices,” said Dr Goklaney. “But, if these products are included then they would probably come under 40 percent Integrated GST (IGST). So, the effect on the prices would be minimal.” IGST being 40 percent would mean that the Central GST (CGST) would be 20 percent and so would be the State GST (SGST). “If they don’t increase the rate of GST for petroleum products, then that would increase the burden on the states,” he said.
CS Malhotra said that the other agenda of the meeting is of the inverted duty structure. He said that there are certain products in the textile industry, where the GST rate on the raw material is around 12 to 18 percent and on the finished goods is five percent. So, in these cases, the input tax credit is higher and it causes problems while distributing the taxes. So the manufacturers are asking for these rates to be aligned for a better flow of money.
The GST council meeting should happen once every quarter but this meeting is being held after approximately seven months. The states have been complaining about this for a long time.
The briefing of the meeting would be released at 7 pm on May 28, 2021, from New Delhi.
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