Ministerial group meets, recommends tariffs for individual items.
The Goods and Services Tax Council (GST) failed to agree on immediate tax breaks for critical pandemic relief supplies, including COVID-19 vaccines, and set up a group of ministers to recommend tax rates for individual items by June 8.
Union Finance Minister Nirmala Sitharaman, who chaired the first meeting of the council in nearly eight months on Friday, said there had been lengthy discussions with “different points of view” on the taxation of COVID-related items that led to the eight-hour conversation between the States and the center dominated.
“So I decided, and announced a group of ministers, that I would submit a report within ten days so that if further reductions need to be made, it can be done,” said Ms. Sitharaman. Opposition states including West Bengal, Kerala and Punjab have called for the GST, which is levied on COVID-related items, to be abolished.
The minister added that the impact on revenue is not driving reluctance to cut rates, but whether the GST relief for such items will benefit ordinary people. Technical bodies reviewing the rates have determined that the rate cuts will have a “collateral effect” on other items, she said.
“I underline the fact that it is not as if one segment said we should do it on humanitarian grounds and another said we should not do anything on humanitarian grounds,” the minister said.
While Punjab Finance Minister Manpreet Singh Badal said that “GST # COVID19 aid has been suspended due to a lack of compassion from the Union government,” Ms. Sitharaman, Union Finance Minister, refused to respond directly.
“If we are quick to say that the center has no compassion, I have nothing to say. Ultimately, we are all responsible for the well-being of our citizens. I humbly claim that it is in the interests of all states and the center to ensure that Indians get the vaccine on time and that states get their fair share of the proceeds on time, ”she stated.
However, the council agreed to extend the GST exemption for aid material received free from abroad for donations to government-recognized institutions to those who wish to make such donations by purchasing the material from abroad. The deadline for claiming this exemption has also been extended to August 31.
“With black fungus cases rising, a specific drug required for it – amphotericin-B – has also been added to the exemption list (for tax-free imports),” Ms. Sitharaman told reporters.
When the Delhi Supreme Court lifted the 12% GST levy on imports of oxygen concentrators for personal use, Finance Minister Tarun Bajaj said the order resulted in a situation where the GST levies would be zero if the item was considered “Gift” will be received. but 28% for purchases from abroad.
“The HC has ordered that no taxes will be charged if it is received as a gift. While the notice we issued has been put aside, resulting in being brought in from the outside and by yourself when buying, you will be taxed at 28% which has actually been lowered to 12%. Because of this confusion, this tax has accidentally increased to 28%. But the GoM will take care of that, ”he said.
The industry was largely disappointed with the results. “There have been no major announcements and the issue of GST reduction on COVID items has been postponed for a few more days, which is disappointing. The council has failed to address the major industry and common man problems arising from the pandemic, ”said Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co.
Pay state taxes
A special council meeting will be held to discuss with states how long the GST countervailing levy needs to be extended beyond the current expiration date in July 2022, Ms. Sitharaman said.
For this year’s estimated shortfall in compensation payments to cover government taxes, the Center will raise ₹ 1.58 lakh crore to reimburse states through back-to-back loans, as it did last year.
The same formula that was adjusted last year will be carried over this year. A rough estimate is that the center will have to borrow 1.58 lakh crore and borrow these to the states in turn.