The GST Council on Friday is expected to discuss the reduction in the tax rate on Covid medicines, vaccines and medical devices as well as the means to compensate for the reduction in the state's money.
Sources said that before the meeting of the decision-making body at the top level, finance ministers of 8 states ruled by non-BJP and like-minded parties – Rajasthan, Punjab, Chhattisgarh, Tamil Nadu, Maharashtra, Jharkhand, Kerala and West Bengal – Covid Essential But a mixed strategy has been devised to push for a zero tax rate. The council, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives from all states and union territories, is meeting for the first time in about eight months.
Apart from discussing the tax rate, the council may also consider an estimated Rs 2.69 lakh crore. This amount is to be paid to the states as promised in 2017. This is because they lost revenue due to waiving their right to levy VAT and other taxes. However, exempting end products from GST will not provide manufacturers the option of availing input tax credit on raw materials and hence customers will not benefit much.
In 2018, the council gave a 12% rebate to GST on sanitary napkins after the demands of various women's organizations. Earlier this week, Punjab Finance Minister Manpreet Singh Badal, in a letter to Sitharaman, said that up to 20% of basic goods, including textiles, digital thermometers, laboratory sanitizers / disinfectants and paper bed sheets, are needed to fight the Covid epidemic. Customs duty and Goods and Services Tax (GST) of up to 18% are being levied.
On top of that, a 10% social welfare surcharge is levied on such items. Badal said in the letter that it is shocking that despite the crisis, our country is currently levying taxes at such high rates on the essentials. This is causing problems in fighting this epidemic.
Earlier this month Sitharaman almost refused to exempt Covid vaccines, drugs and oxygen concentrators from GST. He said that such exemption would make life saving items expensive for the customers as manufacturers would not be able to pay the tax paid on inputs. Currently, domestic supply and import of vaccines attract a 5% GST, while Covid drugs and oxygen concentrators attract a tax of 12%.
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