FM Nirmala Sitharaman to chair 43rd GST Council meeting today: All you need to know

Finance Minister Nirmala Sitharaman is all set to chair the 43rd GST Council meeting on Friday after a gap of over seven months. The last GST Council meeting was held in October last year even though the Council is required to meet once every quarter. The meeting is crucial as many key decisions are on the cards — some of which will directly impact India’s fight against Covid-19 during the second wave.

PUSH FOR WAIVER ON COVID VACCINES, DRUGS

The most important agenda of today’s meeting will be a waiver of tax on various medicines, medical equipment and health services. Many states are expected to ask the Council to provide waivers on key medical equipment and Covid vaccines in the wake of the unprecedented health crisis.

The finance ministers of at least eight states including Punjab, Tamil Nadu, Chhattisgarh and Kolkata are expected to raise the issue of GST waiver on Covid-related equipment and drugs. They are all likely to press for a zero tax rate on Covid essentials, reported news agency PTI.

 

 

While some tax waivers on medical equipment and oxygen are expected, reports have indicated that the Council is not keen on offering a complete waiver on Covid essentials.

It may be noted that earlier this month, Finance Minister Nirmala Sitharaman had ruled out exempting GST for Covid vaccines, medicines and oxygen concentrators, adding that such a measure will make lifesaving drugs costlier for consumers and manufacturers. As of now, domestic supplies and commercial imports of vaccines attract a five per cent GST, while 12 per cent GST is collected on Covid-related drugs and oxygen concentrators.

DEMAND FOR COMPENSATION EXTENSION

Another important discussion that is expected to be held during today’s meeting on compensation to states. States are likely to demand an extension of the compensation scheme for a period of five years as they are facing a huge shortfall in revenues due to the pandemic.

It is worth mentioning that the compensation shortfall to states is expected at around Rs 1.6 lakh crore during the current fiscal year, most of which are likely to be funded by borrowings.

In view of the shortfall, states are likely to ask for an extension of the GST Compensation scheme beyond July 2022. It is worth mentioning that states were promised compensation for five years since the implementation of GST in July 2017 to make up for revenue shortfall.

Among other matters, a discussion is also expected on the inverted duty structure. In many cases, it has been seen that the tax rates on inputs are higher than what is levied on finished products.

At today’s meeting, many states may ask for a correction in the inverted duty structure, especially in key sectors such as fertiliser, steel utensils, solar panels, tractors, tyres, textile, cloth and more.

According to reports, the GST Council may also consider lowering the GST rate of 28 per cent on two-wheelers in order to offer the segment a boost during the ongoing pandemic. A discussion may also be held to bring natural gas under the GST regime.

Source::: India TODAY, dated 28/05/2021.