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States urge centre for emergency GST meeting to reduce taxes on essential medicines and equipment

States are urging the Centre to call a meeting of the Goods and Services Tax (GST) Council, which hasn't met in six months, as the country grapples with a stronger second Covid wave. This comes as the call for cost reductions on critical drugs and equipment becomes stronger.

In addition, states want to consider extending the payout period of GST compensation under the GST regime beyond July 2022 at the council meeting, as the economy remains uncertain.

States are requesting that main Covid drugs such as Remdesivir, medical grade oxygen used in oxygen cylinders, and related supplements be excluded from the existing 12% levy.

Among the other decisions pending are the rationalisation of GST rate slabs, the correction of inverted duty on some goods, and the inclusion of petroleum products, among others.

The legislation requires the council to meet at least once every three months, but the long break this time has raised concerns.

T S Singh Deo, Chhattisgarh's health minister, who represents the state at the council, told that the state would write to the Centre requesting a GST exemption on Remdesivir and related supplements. “We have placed the order with Mylan Laboratories for 90,000 injections at the rate of Rs 1,400 plus 12 per cent GST. Around 2,000 injections will come in two days and another 28,000 within a week, which makes it 30,000 injections a week” said Deo.

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As economic uncertainty persists, Punjab finance minister Manpreet Singh Badal said that states should discuss extending the GST compensation issue beyond July 2022 in the council. “Rules require the GST Council to meet once in a quarter. This is the time to repair the GST regime. Unless it is done in the formative stages, that is, less than five years, it will not get repaired. We need to discuss GST compensation  extension, but first we need to meet,” said Badal.

After the introduction of the GST in July 2017, states have been promised a five-year payout to make up for any revenue deficit that might occur as a result of the loss of indirect tax autonomy. Automobiles, cigarettes, and aerated beverages are among the products in the 28% GST bracket that are subject to a compensation cess. On October 12 of last year, the GST Council met to finalise the contours of borrowing by states to fulfil reimbursement criteria for the shortfall.

Kerala Finance Minister Thomas Isaac said the council needed to meet as soon as possible to talk about how states would deal with finances after the reimbursement period ended. “The Centre must convene the meeting and seriously consider increasing and extending the compensation period to beyond July 2022,” said Isaac.

Officials from the Finance Ministry claim the delay is due to elections in key states and the formation of new governments. “We would like representation from all states in the council. So, it is better that it takes place after new governments are formed in the poll-bound states,” said a key finance ministry official.

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The topic of inverted duty structure correction in some products such as textiles,footwear, and fertilisers, among others, is still being debated. Due to Covid, the decision on correction was postponed in June of last year.

The council had to increase the rate on cell phones and designated sections from 12% to 18% to fix the inverted duty structure. When the rate on inputs is higher than the rate on the final product, an inverted duty structure results. In addition, the merging of the 12% and 18% slabs for a more efficient rate structure will be addressed.

The 15th Finance Commission, led by N K Singh, has proposed simplifying GST into a three-rate system, with a 5% merit rate, a rate derived by combining 12 and 18%, and 28-30% de-merit rate.

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Many crucial decisions affecting the welfare of states and taxpayers are pending, according to Rajya Sabha member and former minister Jairam Ramesh, who recently tweeted that the council has not met in six months.

An Expert Said that; Apart from rate rationalisation, the council needs to address a number of important topics. “Industry would expect Covid-related relaxations as well, both in terms of compliances and working capital support...”

An Expert Said that;  “A discussion on rate rationalisation, inclusion of some petro products, correction of inverted duty structures and introduction of new returns have been on the anvil for some time now.”




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