Discussions to extend the GST compensation cess levied on items such as cars are also on.
Planned merger of the 12 percent and 18 percent goods and services (GST) taxes into a universal slab rate is likely to be delayed, sources told Mint.
As per the report, the plan to merge the slabs is “under construction for several months” and would require a “change in design of the GST structure itself and impact some goods”, one state government source said.
Moneycontrol could not independently verify the report.
Three sources told the paper that talks between state governments and the Centre are on, and discussions to extend the GST compensation cess levied on items such as cars are also on.
Notably, the new merged rate is expected to be between 12-18 percent and could increase tax burden on items currently charged 12 percent, while reducing burden on those in the 18 percent range.
Likely items to be impacted include processed food, medical grade oxygen and medical grade equipment, it added.
The matter is expected to be among the priority discussions during the GST Council meeting on May 28, amid the ongoing COVID-19 situation in India.
There are also expectations that the GST Council will set rates for COVID-19 vaccines during the meeting. One of the sources said that the meeting’s agenda will be ready by May 25 and this meeting is likely to be a lengthy affair, it added.
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Experts feel there is “need for clarity” on rate cuts on vaccines and availability of input tax credit on donated medical supplies or supplies used for personal medical use.
GST exemption on vaccines has been broached by West Bengal, Punjab and Odisha, but Finance Minister Nirmala Sitharaman had explained that a full exemption would result in vaccine manufacturers passing on their input cost to end consumers through increased retail price.
Experts however pointed out that zero-rating GST instead of exemption could circumvent this issue and allow manufacturers to claim refunds for taxes on inputs.
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Meanwhile, other topics of priority at the meet would include discussion on GST compensation mechanism for FY22 – specifically if the borrowing scheme instituted last year to meet states’ GST compensation is to be continued,
The Finance Ministry did not respond to queries, the report added.