Five things to watch out for in the GST Council Meeting today

The GST Council's 45th meeting is slated to take place later in the day in Lucknow. This council meeting is the first in-person meeting since the COVID-19 pandemic broke out in the country.

Moneycontrol takes a look at the key decisions that are expected to be taken by the GST Council.

Compensation to States beyond June 2022

While the centre has agreed to extend the compensation cess and the shortfall due to states, the modalities and details will be discussed at the meeting today. The centre is expected to present various options for a compensation formula to the States.

When the GST was introduced, states had agreed to join the new tax regime provided they were compensated for any revenue loss in the first five years from July 1, 2017, to June 2022. It was in October 2020 that the Council had decided, to extend the compensation beyond June 2022.

Taxing Petroleum Products 

The GST Council is expected to weigh upon the issue of bringing petrol, diesel and other petroleum products under the ambit of GST.

The move will require huge compromises by both central and state governments on the revenues they collect from taxing these products. Central and state taxes on petroleum products contributed over ₹5.55 lakh crore in 2019-20, and diesel and petrol are the two biggest revenue earners in that order. Uniform GST will drastically reduce central and state levies on petrol and diesel. GST is being thought to be a solution to the problem of near-record high rates of petrol and diesel  in the country.

In June, the Kerala High Court had asked the GST Council to decide on bringing petrol and diesel within the GST tax regime.

Food Delivery apps to be treated as restaurants

The GST Council may deliberate on including food delivery apps like Zomato and Swiggy within the ambit of restaurant services and levy 5 percent GST.

Once approved by the GST Council, food delivery apps will have to collect and deposit GST with the government, in place of restaurants, for deliveries made by them.

The apps are currently registered as Tax Collectors at Source (TCS) under GST. As per reports, tax loss to exchequer due to alleged under-reporting by food delivery aggregators is Rs. 2,000 crore since the past two years.

Extension on concessional rates for Covid-19-related drugs

The Council is expected to extend the existing concessional tax rate structure on Tocilizumab, Remdesivir, Amphotericin B and anti-coagulants like Heparin,  by 3 months till December 31, 2021. GST Council had earlier recommended GST rate reduction, till 30th September, 2021.

Tax rate on Amphotericin B, Tocilizumab was cut to 'Nil', while Remdesivir and Heparin was reduced to 5 percent from 12 percent in June 2021.

The Council may also discuss the proposal of reducing GST from 12 percent to 5 percent to seven more drugs till December 31, 2021. These are -  Itolizumab, Posaconazole, Infliximab, Bamlanivimab & Etesevimab, Casirivimab & Imdevimab, 2-Deoxy-D-Glucose and Favipiravir.

Inverted Duty Structure

The Council is expected to take up the matter of inverted duty structure.

On September 13, the Supreme Court said that a refund of unutilized input tax credit (ITC) is permissible only with respect to inputs and not for input services in the inverted duty structure.

Refund of the unutilized ITC under the inverted duty structure of GST has been a long-pending issue for businesses because of higher levies on raw materials compared to the finished goods.

The GST Council has addressed the issue of inverted duty structure for many industries, however, it still persists for footwear, textiles, pharmaceuticals and fertilizers.

The top court in its judgement also urged the GST Council to take a policy decision and reconsider the formula in view of anomalies pointed out by assessees in the computation of input tax credit in the inverted tax structure.