The all-powerful Goods and Service Tax Council, on May 28, decided to exempt from integrated GST Covid-related items which are imported on payment basis for donating to the government or on recommendation of state authority to any relief agency, till August 31.
These items include medical oxygen, concentrators, certain diagnostic markers test kits and COVID-19 vaccines, etc. The centre had earlier already exempted items through free donation route from IGST. That exemption has been extended to August 31 as well.
Addressing a media briefing, Finance Minister Nirmala Sitharaman also said that a group of ministers will be quickly formed to deliberate on other possible reductions in Covid-related items.
"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 tomorow.
Compensation remains a sticking point
The Finance Minister also said that the centre will borrow Rs 1.58 lakh crore this fiscal, more than last year, under the compensation cess window, and will pass the amount on to states.
However, a source in one of the states said that this amount or the issue of compensation borrowing has not yet been cleared by the GST Council. Indeed, the issue of compensation did not find mention in the press release that followed.
"The back-to-back loan of Rs. 1.58 trillion announced after the GST Council meeting, is in line with our estimate of a gap between the GST compensation requirement and cess collections of Rs. 1.65 trillion in FY2022," said Aditi Nayar, Chief Economist with ICRA Ltd.
"If the tranches of this loan start flowing to the states soon, it will alleviate the states’ anticipated revenue crunch over the next two months. The data for the generation of GST e-way bills confirms that the staggered onset of the localised lockdowns has had an adverse impact on economic activity since April 2021," Nayar said.
Sitharaman assured that there will soon be a special session only to discuss the issue of compensation cess beyond July 2022.
She said that The Council also took up the issue of inverted duty structure on various items, but decided to defer the matter for later meetings. "Like last year, we felt not the right time for a correction on inverted duty structure, Sitharaman said.
A number of states had reportedly proposed to Sitharaman, who heads the Council, to slash the Goods and Services Tax (GST) for medical grade oxygen, oxygen concentrators, pulse oximeters and COVID testing kits.
Ahead of the meeting, the opposition Congress party appealed to the government bring down the tax rate on essential items linked to COVID-19 to zero.
"Imposing GST on essential medical products like oxygen, ventilators, vaccines and medicines during a pandemic is cruel and insensitive. In today’s GST Council meet, the government should remove GST from all life saving medicins and equipment that are being used to fight Covid," Congress' UP general secretary Priyanka Gandhi Vadra had tweeted.
A number of state governments, including Punjab, West Bengal and Odisha had earlier written to the Centre seeking waiver of GST on the COVID-19-related drugs and medical equipment.
Sitharaman drew attention to the government's move to address late fee amnesty related matters, saying it significantly reduces compliance burden by firms. An amnesty scheme has been recommended for reducing the late fee payable in cases of delay in furnishing of FORM GSTR-3B 3B for the tax periods from July, 2017 to April, 2021. Also, late fees have been rationalized for FORM GSTR-1, GSTR-4 and GSTR-7.
"Almost 89 percent of the GST taxpayers constitute small taxpayers. They can now file their pending returns by availing the benefits of this amnesty scheme with reduced payments," the Finance Minister said.
The Council also allowed a host of further relaxations for taxpayers. This includes extension of due date of filing GSTR-1/ IFF for the month of May 2021 by 15 days, extension of due date of filing GSTR-4 for FY 2020-21 to 31.07.2021 and extension of due date of filing ITC-04 for QE March 2021 to 30.06.2021, among others.
"While the compliance relief is likely to benefit around 89 per cent of the taxpayers, much was expected from the GST Council, as it met after more than 6 months," said. Saket Patawari, Executive Director–Indirect Tax, Nexdigm.
"While all the recommendations may provide temporary reliefs to the taxpayers, some important aspects like correction of duty inversion, entitlement to ITC vis-à-vis vaccination for employees, and extension in due dates for GST returns remain eluded," Patawari said.