GST Council Meet: No Consensus on Tax Relief on COVID Supplies Yet

According to a finance ministry statement, a group of ministers has now been put in charge of the matter.

Union Minister of Finance and Corporate Affairs Nirmala Sitharaman.

(File photo)

At the Goods and Services Tax Council meeting on Friday, 28 May, the central and state governments could not reach a consensus on the issue of tax exemption on medical supplies and vaccines needed to combat COVID-19.

According to a finance ministry statement, a group of ministers, which has been directed to submit its report on 8 June, has been put in charge of the matter.

Following the meet, Finance Minister Nirmala Sitharaman said, “Will these benefits eventually be passed over to the end-user...The patient, the citizen...On that there were differing views..So I suggested it should be taken to GoM [group of ministers] and then take a view,” The Indian Express reported.

However, the council made a decision to exempt the Integrated Goods and Services Tax, or IGST component, on the import of several medical equipment and COVID-19 related material such as vaccines, medical oxygen, concentrators and other oxygen storage and transportation equipment, and some diagnostic markers test kits till 31 August.

The exemption is also applicable on vials of Amphotericin-B, which is the drug used to treat mucormycosis, or “black fungus”, the finance ministry said.

Before the decision, these aforementioned good were suitable for tax exemption only when they were imported without cost for free distribution.

Additionally, the Centre also proposed market borrowing of Rs 1.58 lakh crore to compensate states for the GST shortfall due to back-to-back loans like last year, however, several states disagreed, suggesting it was an underestimation of the predicted revenue losses.

The Centre has set the GST compensation requirement at Rs 2.7 lakh crore for the financial year 2021-22, of which Rs 1.1 lakh crore will likely be met through cess collection, Scroll reported.

Same as last year, revenue growth of 7 percent has been predicted to forecast the shortfall and borrowing requirement. However, the Centre and states do not agree on the issue of revenue growth estimation.

Speaking to The Indian Express, Kerala Finance Minister KN Balagopal said, “Question of consensus is not there,” adding that “The 7 percent growth estimate will not be attainable because now this month there is not much growth [in revenues], at least in time of lockdown. That’s why that expectation is not correct.”

Punjab Finance Minister Manpreet Singh Badal and Chhattisgarh Finance Minister TS Singh Deo also held contradicting views to the Centre’s projections.