GST Council Meet | GST exemption on Covid essential medicine extended till December

Compulsory licensing in emergency situations lets drugmakers manufacture the medicines without permission from the patent holder. (Remdesivir Image: Reuters)

The GST Council has extended the GST rate cuts on Covid essential items till 31 December. However, the latest extension only includes medicines and not other medical equipment, Finance Minister Nirmala Sitharaman said on September 17.

"The rate cuts on these were earlier applicable till September 30. This is being extended keeping in mind the continuing demand for these medicines," Sitharaman said while addressing the media after the 45th GST Council Meeting held in Lucknow. Tax rates on medicines used in cancer treatment have also been cut from 12 percent to 5 percent, she added.

This was the first in-person meeting of the all-powerful federal body in nearly two years. The last in-person GST Council meeting was held in December 2019 in New Delhi. Since then five more meetings have been convened through video conference.

At its June 12 meeting, the GST Council had slashed the GST rates on a number of items crucial in the fight against Covid-19 pandemic. These include essential medicines, oxygen, oxygen generation equipment and related devices, and diagnostic and testing machine kits.

The items on which rate cuts were made included Remdesivir, Tocilizumab, medical grade oxygen, oxygen generator, ventilators, masks, covid testing kits, oximeters, hand sanitizers, cremation furnaces, ambulances, temperature checking devices and others.

Inverted Duty Structure

Sitharaman announced that inverted duty structure on footwear and textiles will be corrected from Jan 1, 2022.  On locomotives and certain railway parts, GST rate has been increased to 18 percent from 12 percent to correct inverted duty structure. On the same note, 12 percent GST will be applicable on specific renewable devices.

The Council had taken up the matter of inverted duty structure on the advice of the Supreme Court. A recent judgement by the apex court had clarified that refund of unutilized input tax credit will not be available in case of refund due to inverted duty structure. The Court in its judgement had accepted that there is an anomaly in the formula for computing the quantum of eligible refund and has urged the GST Council to reconsider and take a policy decision regarding the same.

The Council took up the matter of how to deal with profiteering cases and decided whether the term of the National Anti-Profiteering Authority will get over after November 30, and instead the Competition Commission of India (CCI) or any other authority could be given its mandate.

Other decisions

States charge national permit fee for granting permit to goods carriage to operate across India. This national permit fee has been exempted from GST. Trainees under skill development programs will also not need to pay GST.

The government has also extended the GST exemption on transport of export goods by vessel and air by one more year ill September, 2022. The exemption was given due to the dificulty faced by exporters in seeking tax exemptions.

Petrol and Diesel Under GST

Despite the issue being discussed extensively, the latest meeting did not see petrol and diesel being brought under the GST fold. States have broadly argued against the idea, saying this was not the right time to implement the idea.

The Centre’s excise duty collection in 2020-21 was Rs 3.9 lakh crore, about 62 percent higher than the Rs 2.4 lakh crore in 2019-20. Out of the Rs 3.9 lakh crore, Rs 3.45 lakh crore was collected only in excise duties on petroleum products. In just the April-June quarter of the current financial year, the Centre collected about Rs 94,181 crore in revenue through excise duties on petrol and diesel.

States have also used their taxation power on fuel to raise resources. The price of fuel differs from state to state, depending on the rate of local taxes like VAT and also freight charges in that state, as the attached charts show.