A Group of Ministers, which will comprise of Finance Ministers of some states and possibly central government ministers, will deliberate on zero-rating of products which are essential in the fight against Covid-19, a top government official told Moneycontrol.
While zero-rating of items was discussed at the GST Council meeting on May 28, it was not accepted by the Council.
Finance Minister Nirmala Sitharaman said that a group will be formed to discuss reductions which were not decided upon. The council has already exempt from integrated GST items such as medical oxygen, concentrators, certain diagnostic markers test kits and COVID-19 vaccines, etc, if imported on payment basis, for donating to the government or on recommendation of state authority to any relief agency.
"The group of ministers will submit its proposal by 8th June so that any further reductions, if they need to be done, will be done" Sitharaman said, adding that the group will be formed by tomorrow.
"The group will discuss zero-rating of items or whether the any GST rate reductions can be done for items which are domestically produced or comercially imported," the official, who was part of the Council deliberations, told Moneycontrol.
The centre, through an earlier statement by Nirmala Sitharaman, has already made its stand clear that exempting domestically produced and commercially imported items from GST will lead to manufacturers unable to avail of input tax credit, which in turn could lead to higher prices for customers.
The proposal of zero-rating covid items was first proposed by by Bharatiya Janata Party’s Rajya Sabha member and former Bihar Deputy Chief Minister Sushil Kumar Modi earlier this week and was backed by experts.
As per the definition by Central Board of Indirect Taxes and Customs, by zero rating it is meant that the entire value chain of the supply is exempt from tax, not only the final product. This bypasses the issue of input tax credit.
At the latest GST Council meeting, a number of State Finance Ministers are learnt to have raised the issue of zero-rating.
"I request that at least for a temporary period, zero rate of GST should be levied on Covid-19 vaccines, Remdesivir and Tocilizumab by State Government and agencies. This will ensure that the cost of these essential items is reduced significantly, without the suppliers having to absorb any reversal of input tax credit," the new Tamil Nadu Finance Minister Palanivel Thiaga Rajan said in his speech to the Council.