1st physical GST meet since Covid indecisive; Tax on Covid drugs cut till year end
The Goods and Service tax council, comprising the Finance Ministers of all States and Union Territories and Union Finance Minister, which met here on Friday failed to arrive at a decision on the inclusion of petroleum products and diesel in the GST. Union Finance Minister Nirmala Sitharaman said that it was not time for including petrol and diesel.
The council extended concessional tax rates on Covid-19 medicines, cut tax on cancer drugs and waived GST on import of highly expensive medicines for muscular atrophy.
The 45th meeting of the GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising State Finance Ministers, is the first physical meeting since the onset of the Covid-19 pandemic. The last such meeting took place 20 months ago on December 18, 2019.
The council’s agenda included discussion on taxing petrol and diesel under the single national GST tax, extending tax concession to 11 Covid-19 drugs, and review tax rates of over 4-dozen items, like oncology medicine and coconut oil among others.
The discussion on inclusion of petrol and diesel under GST was taken on the direction of the Kerala High Court. The court had directed the matter to be placed before the council for discussion. However, the Centre and the States failed to arrive at a decision regarding the inclusion of petrol and diesel under the ambit of GST regime.
Kerala Finance Minister vehemently opposed any move to bring petrol and diesel under the GST regime as that will further reduce revenue generation for the State and asserted that the Centre should reduce its levies on the two commodities to provide relief to the common people. Central excise and State VAT (Value Added Tax) make up for almost half of the retail selling price of petrol and diesel. Bringing them under the GST would impact revenue generation for the States.
Kerala Finance Minister K N Balagopal said the fuel prices skyrocketed due to the huge increase of its cess by the Centre and if the Union Government reduces the cess that will help in bringing down the prices of petrol and diesel. According to him, if petrol and diesel are brought under the GST regime, the State will lose Rs 8,000 crore annually.
UP Finance Minister Suresh Khanna also opposed the move. He tweeted “the State is opposed to petroleum products bring under GST as the State will lose a big source of revenue and ultimately it won’t be in people’s interest’’. Khanna also claimed the issue of bringing petroleum products was not in the agenda of the GST council meeting.
The GST Council granted exemptions to certain life-saving drugs and the drugs suggested by health ministry for treating muscular atrophy. Union Finance Minister Nirmala Sitharaman said, “We have seen in the last one year and probably earlier that some life-saving drugs, which are not connected with Corona and are very expensive. Exemptions have been given for such drugs.”
She further added, “I am giving the names of two because those two are very expensive drugs - Zolgensma and Viltepso. These two are very important drugs which cost something like Rs 16 crores. So the council has decided to grant exemption from GST for these 2.”
The Finance Minister further added, “Drugs that are suggested by the Ministry of Health for treating muscular atrophy, on the recommendation of Health Ministry and Dept of Pharmaceuticals, are also exempted for IGST on import for personal use.”
To check the tax evasion by the restaurants, the GST Council has fixed levy level for Food-delivery apps like Swiggy and Zomato. The Council stated that the place of the delivery will be the point where the tax will be collected by the food delivery apps. They will pay GST on it. The Finance Minister said there is no new tax. The tax was earlier payable by the restaurants, now the tax will be paid by the food delivery aggregators.
The Centre has declined to extend the period of compensation to states beyond five years or July 2022. The GST council has however set up a Group of Ministers (GOM) to chalk out the crucial issue of compensation for States beyond June 2022. GOM has been tasked with discussing all issues involved in compensations and compensation cess and has been asked to submit the report to the council in two months.
The Centre in June 2017 had guaranteed annual hike in tax collections to all the States after the implementation of the GST. The Centre had also promised to compensate the States for the shortfall in revenue. The Centre has said the period of cess collection under GST will be extended till March 2026 and the proceeds will be utilised for the repayment of the loans obtained by the states in 2020-21 and 2021-22 on account of shortfall in revenue due to Covid.
The council discussed how long will it take for states to repay the amount borrowed last year. During the current fiscal the Centre has already paid Rs 75,000 crore to the States for the compensation shortfall.