Sitharaman chairs first GST council meeting in 8 months; States push for compensation extension

New Delhi, May 28: Finance Minister Nirmala Sitharaman chaired GST Council meeting via video conferencing today, after a gap of 8 months to "help set the GST regime right".

The 43rd GST Council is likely to discuss a reduction in the tax rate on Covid medicines, vaccines and medical equipment as well as means to make up for the shortfall in revenues promised to states.

GST on Covid Supplies

Non-BJP ruled states like Rajasthan, Punjab, Chhattisgarh, Tamil Nadu, Maharashtra, Jharkhand, Kerala and West Bengal -- have devised a joint strategy to press for a zero tax rate on Covid essentials.

At present, domestic supplies and commercial imports of vaccines attract a 5 per cent GST while COVID drugs and oxygen concentrators attract a 12 per cent levy.

Sitharaman had, however, ruled out exempting COVID vaccines, medicines and oxygen concentrators from GST saying such an exemption will make the lifesaving items costlier for consumers as manufacturers will not be able to offset the taxes paid on inputs.

GST on Two Wheelers

The council may also take up two other significant things at its next meeting, including lowering GST rates for two-wheelers and bringing natural gas into the indirect tax fold, according to a report in IANS.

Natural Gas

GST Natural gas may be used in a three-tier GST scheme, with prices varying depending on consumption, according to reports. As a result, while residential piped natural gas (PNG) could be taxed at a lower rate of 5%, commercial piped natural gas could be taxed at a median rate of 18%, and car fuel CNG could be taxed at a maximum rate of 28%.

Inverted Tax Structure

Fertilizer, steel utensils, solar panels, tractors, tyres, electrical transformers, pharma, textile, fabric, and railway locomotives all require inverted tax structure correction. Although imported tyres are currently subject to a 10% duty, inputs such as rubber are subject to a 20% duty. Solar modules, on the other hand, are duty-free, though their components are subject to a 5%-10% levy.

GST Refunds

The GST refunds and the concerns of exporters are likely to be on the agenda at the GST Council. The pandemic has wreaked havoc on industries such as hotels, tourism, and retail. The Council will have to consider releasing GST refunds to these industries as soon as possible.

The Centre had last fiscal year released Rs 70,000 crore to states on account of GST compensation. This is over and above the Rs 1.10 lakh crore released to states under the special borrowing mechanism to compensate them for shortfall in the GST collection this financial year.

As much as Rs 63,000 crore worth compensation is still due to be paid for 2020-21 fiscal year which ended March 31, 2021. The impact of second wave of the pandemic on GST revenue is likely to be taken into account in the forthcoming GST Council meeting today.